Foundations` aid `right thing to do` for Detroit

Transcription

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1/17/2014
7:09 PM
Page 1
®
www.crainsdetroit.com Vol. 30, No. 3
JANUARY 20 – 26, 2014
$2 a copy; $59 a year
©Entire contents copyright 2014 by Crain Communications Inc. All rights reserved
Foundations’ aid ‘right
thing to do’ for Detroit
JOHN SOBCZAK
Page 3
Worry was dragged-out Ch. 11
BY SHERRI WELCH
ANTHONY BARCHOCK
Detroit’s waste
contract: A
winner and
a waiter
Is this guy
the Lions’
Alan
Mulally?
Fords, fans
hope so
CRAIN’S DETROIT BUSINESS
The $330 million that a group of
local and national foundations has
committed to the city of Detroit is
largely discussed as helping the Detroit Institute of Arts avoid the sale of
its art and to shore up underfunded
pensions.
But the sales pitch U.S. District
Court Chief Judge Gerald Rosen and
a team of mediators made to the
foundations in early November was
more like this: Their contributions,
bolstered by state funds, could make
a long-term difference to Detroit.
And without them, the bankruptcy likely would see legal challenges
for the next several years, said Kresge Foundation President Rip Rapson.
Kresge’s trustees realized years
$100M CONTRIBUTION? DIA
THINKS IT CAN’T PAY THAT
Support for Gov. Rick Snyder’s
plan for $350 million to augment
the $330 million committed so far
by foundations to the DIA fund was
uncertain, as was the amount the
DIA itself will be required to pony
up as part of the plan, Page 15
The Detroit Medical Center increased
profitability during its first two years as a forprofit system owned by Vanguard Health
Systems Inc. and did so at a faster rate than
when it was a nonprofit, according to a review
of Medicare reports and DMC officials.
“Everything we have done as an organization
since Vanguard (took over) has been to
allocate more resources to the bedside,”
said Joe Mullany, the DMC’s CEO.
Last May, Mullany (right) began daily lean
management walks, in which administrators
travel the floors of DMC hospitals and hear
employees such as Pam Torrance (left) of
Children’s Hospital of Michigan talk about
how they would go about reducing costs.
Global call center says it is
closing Ann Arbor facility
NEWSPAPER
See DIA, Page 15
BLOOMBERG
DMC costs down, profits up
This Just In
The Utah subsidiary of a
Paris-based global customer
support and call center,
Teleperformance Inc., has notified the state it was closing
its Ann Arbor offices and letting go all 430 employees on
Jan. 19.
Vice President of Human
Resources Marcie Ballard said
the company was not able to
renew its contract with its
Ann Arbor client and was
“providing (the state) as
much advanced notice of the
closure as possible under the
circumstances.”
The letter does not identify
the client, but the address on
Traverwood Drive is listed
as the Ann Arbor offices of
Newport Beach, Calif.-based
MSC Software Corp. A phone
call to MSC was not immediately returned.
Typically, federal law requires companies with more
than 100 employees to file a notice with state and local governments 60 days in advance
of any planned plant or building closures or layoffs that affect more than 50 employees.
— Chad Halcom
of litigation would paralyze the city,
scaring away investors, Rapson
said. “The possibility that our money could contribute to an early and
effective exit from bankruptcy was
very compelling to our trustees.”
And an exit from bankruptcy
sooner rather than later would
permit the city to move on with the
task of rebuilding, he said.
The tapping of financial assistance from foundations to help resolve two daunting challenges — un-
SEE STORY, PAGE 9
ED BOTTOMLEY/DETROIT MEDICAL CENTER
State-led work group to review utilities’ stake in solar
BY JAY GREENE
The economics of solar power in
Michigan — and whether DTE Energy Co. and Consumers Energy Co. are
putting enough corporate energy
behind a rebate program that encourages solar use by residential
and commercial customers — is under review by a state work group.
The Michigan Public Service Commission last month upheld a two-
year renewable energy plan proposed by DTE but ordered the
Detroit-based utility to participate
in a community work group that
could recommend expanding the
number of participants in DTE’s SolarCurrents program. The program
is for customers who purchase and
install solar energy systems.
Jackson-based Consumers, the
state’s second-largest utility, voluntarily agreed to participate in the
same work group on solar energy.
The group’s first
meeting is slated
for Feb. 4.
DTE (NYSE:
DTE) initially rejected being part
of the group in a
Nov. 5 regulatory filing, saying
the group has no
authority
to Dimitry
modify
DTE’s
energy plan. However, DTE offi-
cials told Crain’s last week it would
work collaboratively with the
group. The PSC will appoint the
work group members.
“We have a SolarCurrents program, and we believe it is running
well and meeting the objectives of
a pilot program,” said Irene Dimitry, DTE’s vice president of marketing and renewable energy.
“We will be ready if costs come
Do you know Michigan’s
best in-house attorneys
and general counsel?
Deadline: Jan. 27 | crainsdetroit.com/nominate
See Solar, Page 18
I
General Counsel
of the Year
New for 2014
I
I
Rising Star
Pro Bono
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January 20, 2014
MICHIGAN BRIEFS
New reason being an adult stinks:
Snow days have legal implications
You know you’re an adult when
a snow day ceases being an “act of
God” and becomes a legal matter.
David Fernstrum of the Grand
Rapids-based law firm Mika, Meyers, Beckett & Jones told the Grand
Rapids Business Journal that if a
company doesn’t have a policy detailing whether employees will be
paid if a closure occurs because of
inclement weather or other emergency, it probably should make
one.
Fernstrum told the paper that he
handled a handful of calls from
clients during the snowstorm this
month asking what they should do
about employee compensation during office closures. Fernstrum said
the answers depend on the circumstances, including whether an employee is considered exempt or
nonexempt under the Fair Labor
Standards Act.
Remember, this is Michigan
Briefs, meaning short. If you want
to know what you should do, ask a
lawyer.
Who cares about top teams; what
are the state’s standout stadiums?
Stadium Journey magazine, having traveled to more than 1,700
venues around the world, has
ranked the top 100 stadium experi-
Survey: West Mich. biz owners adjust to health reform
West Michigan employers have started to adjust
their operations in response to the Patient Protection
and Affordable Care Act, according to an annual report from Grand Valley State University. The Health
Check report suggests the federal health reform law
drove up the use of workplace wellness, premium
cost-sharing and high-deductible health plans.
“There’s a lot of uncertainty (about the ACA), and
uncertainty leads to more conservative business decisions,” said Paul Isely, an economics professor at
GVSU’s Seidman College of Business and a report coauthor.
Among the results from the survey, to which 168
employers responded:
ences of 2013 in the U.S. and Canada. Here are the winners from
Michigan:
䡲 39. Dow Diamond, Midland,
home of the Great Lakes Loons minor league baseball team
䡲 47. Spartan Stadium, East Lansing
䡲 48. Michigan Stadium, Ann Arbor (And the agony continues for
Wolverine fans.)
䡲 57. Crisler Center, Ann Arbor
(But wait, there’s hope, because …)
䡲 74. Breslin Center, East Lansing
䡲 98. Van Andel Arena, Grand
Rapids
The No. 1 stadium experience:
Amsoil Arena, home of the Bulldogs
of the University of Minnesota Duluth.
Presumably, this venue’s primary
virtue is that it is in Minnesota …
and indoors.
䡲 40 percent were considering passing along to
employees the costs of adhering to mandates in the
law, and 48 percent said they already had.
䡲 41 percent were considering transitioning to a
high-deductible health plan and 36 percent previously had done so.
䡲 About 81 percent offered employee health coverage for 2014. Just 60 percent said they intend to continue offering coverage in 2015, when a $2,000-per-employee penalty takes effect for employers with 50 or
more full-time employees that do not offer coverage.
䡲 22 percent reduced hiring plans for the next 12
months, and 21 percent were considering it.
— MiBiz
One more nudge to get out of
your office chair every so often
In news from the Stories that
Just Write Themselves Department, David Miller, founder of
Grand Rapids Chair Co., has sued California-based U.S. Furniture Inc. because he fell out of one of its chairs,
The Associated Press reported — in
its typical deadpan prose, we note.
Miller said he was at a staff
meeting in 2012 and leaned down
to pick up a pencil. He claimed that
a chair leg broke, he fell to the
floor, suffered a painful back injury and was forced to give up his
job. His lawsuit, filed in U.S. District
Court in Grand Rapids, seeks more
than $75,000.
U.S. Furniture said last week that
no one was available to comment.
MICH-CELLANEOUS
䡲 Saginaw-based Yeo & Yeo CPAs
& Business Consultants has merged
with Hungerford & Co. of Southgate,
the firm reported in a release. The
merger, effective Jan. 1, adds about
$2.4 million in revenue to Yeo &
Yeo, which earned more than $30
million in 2013. The combined firm
is operating as Yeo & Yeo.
䡲 Injection molder Klein Plastics
will move next year from Rockford
north of Grand Rapids to Mansfield, Texas, where parent company
Klein Tools Inc. is expanding its manufacturing headquarters, Plastics
News reported.
䡲 A unit of Grand Rapids-based
Universal Forest Products Inc. plans
to buy the assets of Massachusettsbased National Fiber, which makes
insulation, MLive.com reported.
䡲 Douglas Dozeman, a partner
at the law firm Warner Norcross &
Judd, is the new chairman of the
Grand Rapids Area Chamber of Commerce, which represents more
than 2,700 businesses, the law firm
said in a news release.
䡲 Officials of the West Michigan
Whitecaps, the Class A minor
league affiliate of the Detroit Tigers,
say they will be ready for the home
opener April 8 despite a Jan. 3 fire
that gutted part of Fifth Third Ballpark, the Grand Rapids Business
Journal reported.
Find business news from
around the state at crainsdetroit
.com/crainsmichiganbusiness.
Sign up for Crain's Michigan
Business e-newsletter at crains
detroit.com/emailsignup.
CORRECTION
䡲
A story on Page 1 of the Jan. 13 issue incorrectly reported that
Valassis founder George Valassis was dead.
2 nna ght
b. Pe Hei
FeVillaling
at ter
S
in
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20140120-NEWS--0003-NAT-CCI-CD_--
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January 20, 2014
Page 3
Could Caldwell be the Lions’ Alan Mulally?
Owner Ford chooses coach who’s
calm ‘with a fire burning inside’
BY BILL SHEA
Can Jim Caldwell do for the Detroit Lions in the win-loss column
what Alan Mulally did in rescuing
the Ford Motor Co. from financial
ruin?
That’s what the Ford family is
banking upon.
They’ve hired a head coach who’s
been to two Super Bowls and is not-
ed for his calm demeanor as a manager, say those who have watched
Caldwell’s career.
That calm demeanor and relentless, consistent optimism in public
and behind closed doors is shared
by Mulally.
That measured style also is a radical shift from the last coach, Jim
Schwartz, who developed a reputation for embarrassing sideline
Video: Jim Caldwell talks
about his plans for the Lions,
crainsdetroit.com/video
histrionics and for running a team
widely criticized for talent squandered because of a lack of discipline.
Caldwell “is a very quiet, introspective, spiritual guy. From what
I know of Schwartz, he seems like
the polar opposite,” said Bob
Kravitz, a sports columnist for the
Indianapolis Star who wrote about
Caldwell’s 2009-11 tenure as head
coach of the Indianapolis Colts.
Caldwell, 59, was hired last week
See Caldwell, Page 17
NATHAN SKID/CDB
New Detroit Lions coach Jim Caldwell
(left) with team President Tom
Lewand during the news conference
announcing Caldwell’s hiring.
Change rolls into waste land
New city trash plan
leaves resourceful
nonprofit in limbo
BY AMY HAIMERL
JOHN SOBCZAK
Chuck Rizzo Jr., CEO of Rizzo Environmental Services Inc., said the waste hauler plans this week to end its option
agreement on 316 acres where it had proposed a landfill in Lenox Township.
Preparing for Detroit waste contract,
growing Rizzo drops plan for landfill
BY CHAD HALCOM
Sterling Heights-based Rizzo Environmental Services
Inc. has seen so much growth recently in municipal
and commercial waste collection contracts that it no
longer sees a need to diversify into landfills.
The turning points: Waste collected by Rizzo under a new trash hauling and curbside recycling contract award from the city of Detroit apparently
won’t be leaving the city, and St. Clair County may
become a disposal option for some of its Macomb
County suburban customers.
Company President and CEO Chuck Rizzo Jr. said
the family-owned waste hauler plans this week to
terminate its option agreement on 316 acres of land
where it had proposed the Clinton Valley Farms landfill in Lenox Township. It will also table its applica-
THIS WEEK @
WWW.CRAINSDETROIT.COM
tion for Macomb County officials to allow the landfill in favor of a request to export more trash outside
the county, he said.
Rizzo said a number of market conditions for
waste collection in Southeast Michigan have
changed since the company first entered into the
Lenox option, about a year ago.
One is the likelihood that Rizzo and Florida-based
Advanced Disposal Inc. will be disposing all of Detroit’s trash at the Detroit Renewable Energy LLC
waste-to-energy plant in the city (known as the Detroit incinerator) once the two new Detroit contractors take over solid waste collection for the city on
May 1. That originally wasn’t expected to happen,
when Detroit first shopped a proposal to privatize
waste collection last year.
Matthew Naimi stands in the
doorway of his 300,000-square-foot,
unheated warehouse surveying the
scene before him. He leans back on
his boot heels, hands shoved deep
inside his Carhartt bib overalls.
The parking lot is brimming with
customers despite the polar vortex
quickly sliding
its way into Detroit, with roads
starting to ice
and
temperatures falling fast.
Customers drive
up in cars. Customers walk up
pushing buggies.
A few come off
Naimi
the bus. Customers bringing their recycling to
Recycle Here on Holden Street just
south of Detroit’s New Center area.
“This is caveman-style recycling,” said Naimi, founder and director of operations at the nonprofit. “You have to sort it, put it in
your car, bring it here.”
By the time he closes the doors
that afternoon, 1,867 visitors will
have dropped off bottles, cans,
glass, plastic, cardboard, paper and
magazines. Recycle Here takes anything that can be recycled, not just
items that are accepted in regular
curbside pickup, such as electronics and Styrofoam.
But Recycle Here itself could be
heading toward the trash heap of
history.
When the city of Detroit decided
to privatize waste hauling services
last fall, the announcement elicited cheers by many residents because it included curbside recy-
See Rizzo, Page 16
See Trash, Page 16
Detroit’s auto show: Bigger and Vetter
Crain’s staffers were wandering Cobo last week.
Read about and see what they saw – the Corvette
Z06, for one – at crainsdetroit.com/autoshow
BLOOMBERG/ANDREW HARRER
Small supplier,
big opportunity
Jacqueline Dedo left the
$7.2 billion Dana Holding
Corp. to run the $570 million
Piston Group. For her, the
smaller company allows her
to make a bigger impact.
She’s starting with reviewing
company goals.
See Q&A, Page 5
Company index
These companies have significant mention in this
week’s Crain’s Detroit Business:
American Axle & Manufacturing Holdings . . . . . . . . 5
Avalon International Breads . . . . . . . . . . . . . . . . . 16
Beaumont Health System . . . . . . . . . . . . . . . . . . . 10
Coalition to Protect Detroit Health Care . . . . . . . . 11
Community Foundation for Southeast Michigan . . . 15
Detroit Institute of Arts . . . . . . . . . . . . . . . . . . . . . . 1
Detroit Lions . . . . . . . . . . . . . . . . . . . . . . . . . . 3, 17
Detroit Medical Center . . . . . . . . . . 9, 10, 11, 12, 13
Detroit Renewable Energy . . . . . . . . . . . . . . . . . . . . 3
EQ — The Environmental Quality Co. . . . . . . . . . . . 16
Ford Motor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Green Living Sciences . . . . . . . . . . . . . . . . . . . . . . 16
Henry Ford Health System . . . . . . . . . . . . . . . . 10, 11
Kresge Foundation . . . . . . . . . . . . . . . . . . . . . . . . . 1
Legacy DMC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Michigan Green Safe Products . . . . . . . . . . . . . . . 16
Oakwood Healthcare . . . . . . . . . . . . . . . . . . . . . . 10
The Piston Group . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Plymouth Management . . . . . . . . . . . . . . . . . . . . . 19
Recycle Green . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Recycle Here . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Rizzo Environmental Services . . . . . . . . . . . . . . . . . 3
Rizzo Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Royal Oak Recycling . . . . . . . . . . . . . . . . . . . . . . . 16
St. John Providence Health System . . . . . . . . . 10, 11
St. Joseph Mercy Health System . . . . . . . . . . . . . . 10
University of Michigan Health System . . . . . . . . . . 10
V&M . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Waste Management of Michigan . . . . . . . . . . . . . . 16
Department index
BANKRUPTCIES . . . . . . . . . . . . . . . . . . 4
CALENDAR . . . . . . . . . . . . . . . . . . . . 14
CAPITOL BRIEFINGS. . . . . . . . . . . . . . . 4
CLASSIFIED ADS . . . . . . . . . . . . . . . . 15
KEITH CRAIN . . . . . . . . . . . . . . . . . . . . 6
LETTERS . . . . . . . . . . . . . . . . . . . . . . . 6
MARY KRAMER . . . . . . . . . . . . . . . . . . 6
OPINION . . . . . . . . . . . . . . . . . . . . . . . 6
PEOPLE . . . . . . . . . . . . . . . . . . . . . . 14
RUMBLINGS . . . . . . . . . . . . . . . . . . . 19
WEEK ON THE WEB . . . . . . . . . . . . . . 19
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January 20, 2014
In State of the State, Snyder
pushes immigration reform
state’s roads and bridges,
While he doesn’t dabble
Snyder also did not talk about
but did not spend the increasing the minimum wage,
in national issues often,
time and energy he gave something Democrats have been
Gov. Rick Snyder has conthe topic in 2013, when he pressing him on of late.
sistently talked about the
called on lawmakers to
need to fix the nation’s
And he also didn’t say he is runspend $1.2 billion annual- ning for re-election this fall; but
immigration system.
ly.
Snyder especially has
given the tone of his speech, it was
Since lawmakers did- obvious to everyone in the room
criticized the policies
n’t last year, and all indi- that he wants to give his fifth State
that force many highly
cation are they won’t this of the State address next January.
skilled and Michiganyear, Snyder instead toutuniversity trained graded that there will be
uates to go back to their
about $250 million more
country upon graduaChris Gautz
available this year for
tion, rather than stay
䡲 Jarrod Agen was hired last
week as Snyder’s new communicaroad and bridge repairs.
here and create companies.
Michigan Department of Trans- tions director. He most recently
In his fourth State of the State address on Thursday, Snyder an- portation Director Kirk Steudle worked as the vice president of
marketing and communications
nounced he will begin doing what said $250 million is “a nice start.”
“It’s a one-time shot in the arm,” for Empowered-U, a Silicon Valleyhe can at the state level to provide a
based technology and education
resource for immigrants in that sit- Steudle said.
Not mentioned at all was reform firm. Agen replaces Jeff Holyfield,
uation.
“If someone has the opportunity of the state’s no-fault auto insur- who left in November to become
to come to our country legally, let’s ance system, but before the speech the public relations director for
hold our arms open and say ‘come his top aides said the topic’s ab- the Michigan Lottery.
Chris Gautz: 1-517-403-4403,
to Michigan. This is the place to sence did not indicate he no longer
Twitter:
supports it, just that he did not [email protected].
be,’ ” Snyder said.
@chrisgautz
Snyder announced he will create have room to include everything.
the Michigan Office for New Americans through an executive order.
The office will serve as a clearinghouse for when issues related to immigration arise, said Snyder’s
press secretary, Sara Wurfel. FurCrain’s biennial Cool Places to Work in Michigan awards return this year,
ther details would come when the
and once again Crain’s is working with Best Companies Group of
executive order is issued either this
Harrisburg, Pa.
week or next, she said.
The competition has two parts: one questionnaire for employers, another
As part of his push on immigrafor employees. The combined, weighted results will determine who qualifies
tion, Snyder also announced the
for Cool Places designation.
state has submitted an application
Best Companies supplies all
to the federal government to allow
participating companies —
Michigan to have a state-sponregardless of whether they win the
sored EB-5 visa regional center.
Cool Places recognition — with a
The EB-5 is a type of visa that alBest Companies Group employee
2014
feedback report based on
lows wealthy individuals from othemployee responses to the 72er countries to come to the U.S.
question survey. The report can
provided they invest $1 million
help company executives identify strengths and weaknesses in their
($500,000 in a high unemployment
company culture and practices.
or rural area) in a new commercial
To be considered for Cool Places to Work in Michigan, companies must
enterprise that creates at least 10
register at www.coolplacestoworkmi.com by April 18. Other important dates,
full-time jobs within two years.
samples of the surveys and other information are on the website.
Once registered, companies will be invited to participate in the surveys.
Businesses and nonprofits can apply. Applicants must have a minimum of
15 employees working in Michigan and have been in business at least one
Sometimes as important as what
year, among other criteria.
the governor says in a State of the
Companies pay a fee based on company size to Best Companies to cover
State address is what he doesn’t
survey costs. The cost ranges from $610 to $895 for online surveying, and
say much about.
$765 to $1,660 for paper surveying.
Snyder gave energy just a passing mention, with nothing new
and no specifics. In fact, he spent
just 12 seconds of his hourlong
speech on it.
Passing mention was also given
to Detroit’s ongoing bankruptcy
proceeding, with Snyder saying he
College of Social Sciences
wasn’t going “to dwell on it.” No
mention was given to the idea of
any state funding to help protect
Special guest lecture by
the Detroit Institute of Arts or city
Detroit Police Chief James Craig
worker pensions.
On transportation, Snyder said
more money is needed to fix the
Capitol
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Automotive supplier disputes
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CTIONAL AND MANAGED BUSINESS AVIATION PROGR
PROGRAMS.
SERVING ALL SOUTHEASTERN MICHIGAN.
IS YOUR COMPANY A COOL PLACE TO WORK?
What he didn’t say
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BANKRUPTCIES
CORPORATEEAGLE.COM
The following business filed for bankruptcy protection in U.S. Bankruptcy
Court in Detroit Jan. 10-17. Under
Chapter 11, a company files for reorganization. Chapter 7 involves total liquidation.
Key Hotel Corp., 32851 Gratiot Ave.,
Roseville, voluntary Chapter 11. Assets and liabilities not available.
— Bridget Vis
Thursday, January 30, 2014
7 p.m., in Kresge Hall
36600 Schoolcraft Road
Livonia, MI 48150
Free and open to the public
RSVP to Amy at 734-432-5762
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20140120-NEWS--0005-NAT-CCI-CD_--
1/17/2014
5:48 PM
Page 1
January 20, 2014
Page 5
Small-firm chemistry part of lure for new Piston Group chief
In the automotive realm, busi- technology.
ness chatter has focused on
The daughter of a former assiswomen advancing in higher-pro- tant deputy secretary in the U.S.
file leadership positions with larg- Commerce Department under the
er corporations, such as
Reagan administration,
General Motors Co. naming
Dedo has long underMary Barra as its CEO in
stood business.
December.
She entered the autoBut another of the automotive industry as a comotive industry’s leading
op student in 1979 at the
women bucked the trend
former Cadillac plant on
last week by announcing
Clark Street in Detroit,
her departure from Tolewhile attending General
do-based Dana Holding
Motors Institute (now
Corp. to serve as president
Kettering University) in
of the much smaller RedFlint.
ford Township-based miBy 1987, she served in
nority-owned
supplier
management positions
The Piston Group.
at Robert Bosch Corp. in
Jacqueline Dedo, 52, Jacqueline Dedo, Michigan and Stuttgart,
said the decision to de- The Piston Group Germany, before servpart the $7.2 billion Dana
ing as president of its
for the $570 million Piston Group Ford Motor Co. business. She
was triggered by a desire to make served as a vice president at Cova difference, for example, with isint LLC, then as vice president of
more customized products.
automotive for Motorola Inc. and
Dedo joined Dana in 2008 as vice The Timken Co. until she joined
president of strategy and business Dana in 2008.
development before becoming its
The Piston Group is led by forchief strategy officer in 2010. She mer Detroit Pistons guard Vinnie
was charged with driving the sup- Johnson and offers parts sequencplier’s approach to profitability ing and assembly to automakers,
post-bankruptcy.
including Ford.
After emerging from its more
Johnson will remain the Dethan two-year bankruptcy in 2008, troit-based supplier’s CEO and
Dana closed 2009 with a loss of chairman.
$463 million, but grew net income
The supplier has been growing
to $300 million by the end of 2012. with contracts from Ford and othDedo is credited with structuring ers. In 2012, V. Johnson Enterprises
the supplier’s approach to new LLC announced the formation of a
Q&A
American Axle
estimates backlog
at $900 million
American Axle & Manufacturing
Holdings Inc. said its backlog of new
and incremental business beginning from 2014 through 2016 is estimated at $900 million. The company’s estimate a year ago for its
2013-2015 backlog was $1.25 billion.
“It’s not that we’re not growing,
it’s just the way the figures settle,”
said Chris Son, director of investor relations for Detroit-based
American Axle. “When you carve
out 2013, the numbers look a bit
different, but we still expect to see
18 percent growth in 2014 and 2015
over what we’ve predicted.”
American Axle released its
backlog figure in a statement.
The company’s backlog — an accumulation of work that has yet to
be completed — includes several
projects with its largest customer,
General Motors Co., which had 73 percent of its business in 2012. The current backlog includes an EcoTrac
disconnecting driveline system for
the Jeep Cherokee and a rear drive
module for the Cadillac ATS. Electric and hybrid systems for a future
Qoros model are also planned for
the Israeli-Chinese automaker.
Seventy percent of the backlog is
for customers other than GM, and
two-thirds of the backlog is slated
for passenger car and crossover
vehicle programs. Geographically,
70 percent of the backlog is for programs outside of the United States
— mainly in Brazil, China, India
and Thailand.
— Automotive News
new joint venture with Valeo SA
called Detroit Thermal Systems LLC.
Crain’s reporter Dustin Walsh
chatted with Dedo last week on
the trajectory of her career and
Piston’s opportunity for growth.
business we want and don’t want.
Piston has great employees and
customers but needs a clear direction on what is good growth and
what work is better for our competitors.
What drew you to Piston Group?
It’s a mature startup, in a lot of
ways. I wanted to go somewhere
where I was able to have an impact and really make a difference.
When you go to a company that is
this size with strong management
… you can see your footprints in
the sand. And it’s chemistry.
When you meet Vinnie and you
meet the team he’s assembled, it’s
infectious. I met Vinnie and the
leadership team and felt instantly
at home. How much time do we
spend with our work families versus our real families? You’ve got
to have chemistry.
Is the current market offering any
advantages for Piston?
I’ve always looked at megatrends. Vinnie’s business really
fills a spot with sequencing, airproofing and complicated assembly, which allows for customization. This is important to
automakers as the demand for
customization is driving the market.
I think the technology shift
that’s taking place, new technology coming on and the complexity
that causes for the automakers
while meeting shifting demographics … is creating difficulties.
That creates an opportunity for
Piston to step in and offer that
level of customization for automakers to meet the new demands of the market.
A lot of people expected you to go
to a larger tier-one supplier. Why didn’t you take that path?
Biggest doesn’t always mean
best. At some point, it becomes
complicated. I didn’t necessarily
want that.
What are your goals at Piston?
It’s a little too early, but Vinnie
has talked to me about the opportunities they face. But Piston
needs to focus on the core competencies they have. Maybe it needs
a more clear direction on what
Is there potential for national and
international expansion due to new
global programs?
Expansion and growth is clearly on the agenda. There is a lot of
positive market opportunity and
customer pull. Together as a management team, we will set the
strategic growth direction.
CRAIN’S SEEKS NOMINEES
FOR 20 IN THEIR 20S
Do you know a 20-something who
is someone to watch? Crain’s 20
in their 20s recognition program
seeks young professionals who are
making their marks in the region.
Candidates are not limited to any
particular field or activity but
include up-and-comers who are
making waves as young
professionals within a company,
have shown success or originality
as entrepreneurs, or have made
local impacts in some other
demonstrable way.
Besides the corporate world,
candidates are considered from
creative industries, nonprofits and
social entrepreneurship arenas.
Winners will be profiled in the May
5 edition and honored at a future
awards event.
Nominees must be 29 or younger
before May 5. Nominations are due
Feb. 4.
To fill out the form, visit
crainsdetroit.com/nominate.
Questions? Contact Amy Haimerl
at [email protected] or (313)
446-0416.
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1/17/2014
5:47 PM
Page 1
Page 6
January 20, 2014
OPINION
Rhodes stands tall
in swaps hearings
J
udge Steven Rhodes of U.S. Bankruptcy Court is no
pushover. His surprise rejection last week of the second
deal reached to pay off Detroit’s disastrous swap transaction means he is apparently ready to have the city sue the two
banks that are owed in the controversial 2005 deal.
In fact, he seemed to encourage suing UBS and Bank of
America, an action he said last week was “reasonably likely”
to succeed.
Rhodes’ rejection could lead to more favorable terms or even
the city recouping money it already had paid the two banks.
But it up-ends the deal his own appointed mediator, U.S.
District Court Chief Judge Gerald Rosen, hatched just before
Christmas with the two banks.
Some wished Detroit’s case would be heard in New Jersey
or states whose judges had greater experience in complicated
bankruptcy cases. Rhodes seems to be doing just fine.
Bankruptcy may benefit DIA
Is Detroit’s bankruptcy a “gift” to the Detroit Institute of
Arts? It could be, if it means the museum will emerge as an independent museum, free of any city ownership.
That would be the outcome if the plan backed by U.S. District Court Chief Gerald Rosen to leverage foundation dollars
as a pledge to the city’s pension funds in exchange for liberating the DIA and its collection.
So far, foundations have pledged $330 million over 20 years,
and Gov. Snyder has suggested the state chip in $350 million
over that same period. (See story, Page 1.)
The DIA needs to contribute something, too. But how much?
As always, the devil is in the details, in part because the DIA
can’t jeopardize its millage revenue that is contributing more
than $20 million a year from taxpayers in the tricounty area.
Meanwhile, private donors are stepping up. When Paul and
Carol Schaap of Grosse Pointe pledged $5 million to help save
the DIA collection from a bankruptcy fire sale, they hoped other private individuals would follow their lead.
The Community Foundation for Southeast Michigan,
which is collecting the money, reports more than 150 donations, from 14 states and the United Kingdom. Giving accelerated after National Public Radio reported on the couple’s gift.
And there may be a larger one in the works: the Schaaps’
neighbors in Grosse Pointe have hatched their own plan to collectively match the $5 million.
Details on how to donate to the Community Foundation’s
“Fund to Support Detroit’s Retirees, Cultural Heritage, and
Revitalization” is found on the home page of the foundation
website, cfsem.org.
MARY KRAMER
Candidates need better vetting
Last week, we saw a
steady stream of badnews items about Detroit
councilman
George Cushingberry
Jr. Heck, the guy had
barely gotten his president pro tem seat warm
in City Hall.
It started with the
now-famous traffic stop,
but by week’s end, reports included a temporary suspension of his
law license for a past infraction,
accusations by former clients of
bad performance as an attorney
and a personal bankruptcy filing.
Since most of the bad news actually occurred before the August
2013 primary, the question is:
Where were the news media?
Hindsight is always 20/20, the
saying goes. But the Cushingberry
candidacy raises two additional issues.
First, this seems to be clear evidence of economic pressures on
traditional news media with
shrinking newsrooms. Checking
court records, bankruptcy court,
register of deeds, etc. are the kind
of nuts-and-bolts reporting that
used to be routine. Hard to juggle
when also covering a big story like
the largest municipal
bankruptcy in U.S. history. Or even a big
mayoral election.
In November, a Flint
Journal editor apologized publicly for reporting
that a newly elected
council
member in
Flint had
been convicted of murder and served 19
years in prison. The
conviction was reported as soon as the paper
learned of it — unfortunately not in time for the general
election earlier that same week.
Second, many folks I’ve talked
with before and after the 2013 elections complained that the overall
field of council candidates in Detroit was weak. That reminded me
of an idea espoused by former Detroit Mayor Dennis Archer. He has
urged companies with a stake in
Detroit to look within their employee ranks to encourage credible
and electable candidates to run.
A good example: DTE Energy’s
support for its now-retired execu-
tive, Joyce Hayes-Giles, to run for
and serve the Detroit Board of Education a few years ago. We need
more high-caliber talent in public
office.
Publicly vetting candidates is a
very time-consuming
exercise. Maybe local
news media — and I
include Crain’s Detroit
Business in this group
— need to create a collaborative enterprise
— radio and TV news
departments,
print
news media and digital media — to decide
on templates for candidate scrutiny and
divvy up the reporting and share
results. I imagine that journalism
programs at area universities
could supply some talent, too, that
would help give practical experience at navigating courts and other public sources.
Maybe
“
local news
media need to
create a
collaborative
enterprise.
”
Mary Kramer is publisher of
Crain's Detroit Business. Catch her
take on business news at 6:10 a.m.
Mondays on the Paul W. Smith show
on WJR AM 760 and in her blog at
www.crainsdetroit.com/kramer.
E-mail her at [email protected].
LETTERS
Conway responds to criticism
Editor:
This is to address the comments
about Conway MacKenzie in the
editorial “What we’d like to see
happen in 2014” (Jan. 6, Page 6).
Regarding our contract and the
work that Conway MacKenzie is
performing with the city of Detroit,
I would like to clarify a few items:
Conway MacKenzie completed a very large, pro bono project
for the city in 2012. I would be very
surprised if any professional services firm has ever performed a
pro bono service of this magnitude
in the history of Detroit.
The rates in our contract with
the city reflect by far the largest
discount ever offered in our almost 27-year history. Our rates are
Crain’s Detroit Business
welcomes letters to the editor.
All letters will be considered for
publication, provided they are
signed and do not defame
individuals or organizations.
Letters may be edited for length
and clarity.
Write: Editor, Crain’s Detroit
Business, 1155 Gratiot Ave.,
Detroit, MI 48207-2997.
Email: [email protected]
substantially lower than other
professional services firms involved. In addition, the time incurred on the Detroit engagement
by co-founder Don MacKenzie and
me has not been billed.
The amount you cited for our
contract, $19 million, is a cap, and
our actual fees billed to the city
are likely to be much less. In addition, included in the $19 million is
a provision for up to approximately $7 million related to subcontractors that Conway MacKenzie has
agreed to source and provide to the
city in order to fill critical positions. This is close to a passthrough for us.
Regarding our 25th anniversary party, which was attended by
Keith Crain and most of the
Crain’s staff, I personally paid for
50 percent of the event. Any cost
incurred by the party in 2012
See Letters, Page 7
KEITH CRAIN: It’s time for the greatest show on Earth
With apologies to the circus, we
are lucky enough to have the best
car show in the world right here
on our doorstep.
I have always felt that the best
change they could make in car
dealerships would be to have all
the cars of the same class in the
same showroom. If I were interested in a luxury model, I could
check them all out without having
to drive from showroom to showroom.
Same for sports cars, electric vehicles or trucks. Put them all un-
der one roof and let me
check them out at the
same time.
Well, once a year, at
Cobo Center, they listen
to me. I can check them
all out at my leisure.
The auto companies
have been nice enough
to spend quite literally
millions of dollars on
their displays. They
have new vehicle introductions, prototypes and show
cars that will wet our whistles for
the next few months until they are for sale.
All those millions
spent were for the benefit of the journalists
from around the world
who visit for a few days
and file stories and interviews in publications all over the globe.
But the displays, cars
and trucks remain for
us to check out and
drool over. There is simply no other car show in North America that
even comes close to offering what
this North American International
Auto Show has for us.
The business part of the show is
over. Now we get to enjoy the public show. Not only do we get to see
cars and trucks the rest of the
country won’t see for several
months, we get all the economic
benefits of the business part of the
show.
I really like the opportunity to
see all the vehicles under one roof.
And happily our roof has been
fixed and remodeled to make it a
proper venue for this very big and
bright circus. Cobo Center has
never looked better, and the millions of dollars that they spent
were well worth it.
If you don’t like cars and trucks,
then your best bet is to stay away.
But if, like most of us, you’ve got
some gasoline in your blood, then
come down and enjoy the greatest
show on Earth.
I never get tired of this show. It’s
the greatest on Earth — and it’s an
economic powerhouse for our community.
20140120-NEWS--0006,0007-NAT-CCI-CD_--
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11:38 AM
Page 2
January 20, 2014
LETTERS TO THE EDITOR CONTINUED
From Page 6
would have no bearing on our
rates charged to the city or any
other client in subsequent years.
For the record, the tremendous
amount of food left over from the
party was taken to Detroit shelters
at my insistence.
䡲 We are the only local professional services firm involved in the
core restructuring team for the city
of Detroit. While I know all firms involved with the city care about a
successful outcome for Detroiters,
we have far more to lose. Other
firms will leave after the bankruptcy, but we will remain here.
I have been involved with many
Detroit-based institutions, such as
a board member and financial supporter of the College for Creative
Studies, as the largest sponsor of
Racquet Up Detroit, the Crossroads of Michigan’s soup kitchen,
The Parade Co., etc. Needless to
say, the city is part of me.
While we all could do more, Conway
MacKenzie
and
its
founders/shareholders are sincerely committed to the turnaround of
Detroit. For Crain’s to direct criticism toward my firm for our anniversary event just proves the
glaring lack of the hometown loyalty our town sorely needs.
Better yet, we should be proud of
companies like mine, based in the
Detroit area, that have long-term
success and use our success in
many ways to support our area
and our city.
While I know and respect that
the press must report the news
with no bias, I would have expected you to want sufficient information to properly and objectively
support the off-the-cuff comment
in your editorial. You could have
easily called me for information.
Maybe the information above
would not have changed your offthe-cuff comment, but at least I
would have felt you were interested in coming to a proper opinion.
We are a national firm, founded
and based in the Detroit area. We
have offices in New York, Los Angeles, Chicago, Houston, Dallas
and Atlanta, and the majority of
our business now comes from offices other than Detroit, but we are
a Detroit firm. We have great pride
in our city and wanted to celebrate
our long-term success in our city
and with our city.
Something for you to ponder.
Van Conway
CEO
Conway MacKenzie Inc.
Detroit
Conway MacKenzie
supports Detroit
Editor:
In your Jan. 6 editorial “What
we’d like to see happen in 2014,”
Crain’s made mention of Van Conway and his firm, Conway
MacKenzie. Unfortunately, your
publication did not take the time
to look into his many generous
contributions and community
building activities each year. His
involvement with The Parade Co.
is just one example of his commitment to our community.
Your article specifically said
that he should spend money on
something to benefit Detroit. His
support of The Ford Fireworks,
America’s Thanksgiving Parade
presented by Art Van, and Hob
Page 7
TALK ON THE WEB
Nobble Gobble are just some examples of his never-ending support of
Detroit.
His support also shows up in so
many other ways for so many organizations and worthwhile efforts. It
is also done with his heart and a
passion for what is right in Detroit.
We are very fortunate in this city to
have so many people and companies, Crain’s Detroit Business and
the Crain family included, that give
so much to benefit so many. Van
Conway and the team at Conway
MacKenzie are high on that list of
those consistently making a difference in Detroit.
Tony Michaels
Re: Denso buys 81,000-square-foot
building for expansion in Southfield
Re: Dustin Walsh’s blog: What’s
priority with $1B budget surplus?
They should relocate to Detroit
so they can attract top young talent. Sorry, Southfield, but the
best knowledge workers aren’t interested in your sprawling city.
Bill Jones
It is not surplus. It is excess taxes collected. The only solution is
to give the excess taxes collected
back to who owns that money —
the taxpayers. It is their money
and NOT the government’s money. Total tax refund.
William J
Re: Foundations contribute $330M to
help protect DIA collection, pensions
Great news! Especially with all
the national and foreign journalists in town for the North American International Auto Show!
Michael Hinsky
President and CEO
The Parade Co.
No question about it, the people
of this state would be better off
(both the rich and the poor) if that
billion was put into economic development. What are they doing in
New York to bring jobs in? Until
we get our people back to work,
why cut taxes? Tax cuts don’t get
the results they did when we had
an American economy. Now most
of the benefit goes to the foreign
countries.
Dumbhillbilly
Re: Visiting journalists’ view of Detroit
Let them see Detroit’s neighborhoods and then ask them what
they think.
D. Schultz
Re: Lions hire Jim Caldwell as coach
Same old Lions. It’s the owner
that needs to be fired. What a joke.
Gerald Daugherty
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DBpageAD_DBpageAD.qxd 1/9/2014 9:57 AM Page 1
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Page 9
People
DETERMINING PROFITS IS
A NUMBERS GAME
Neumeyer
Juleff
䡲 Doris Neumeyer, R.N., from Beaumont
ED BOTTOMLEY/DETROIT MEDICAL CENTER
Pam Torrance, care management specialist at Children’s Hospital of Michigan, shows DMC CEO Joe Mullany (left) and
others the key performance metrics on a department’s lean management board during a daily round by hospital
executives.
DMC NET INCOME
BY JAY GREENE
2010
2012
DMC
Page 13
132,762
See DMC, Page 10
-
125,665
124,827
$1.62B
$12.3
L
$1.72B
Ky.-based Cost Report Data Resources.
VITAL SIGNS
“From the date we acquired DMC, we had
operating expense efficiencies,” said Phil Roe,
a former Vanguard CFO who now is senior
vice president of finance for Tenet Healthcare
Corp., which acquired Nashville, Tenn.-based
Vanguard last Oct. 1.
“We saw and treated more patients in 2011
and 2012.”
Roe attributed revenue increases to adjusted discharges that increased 4.9 percent in 2011
and an additional 2 percent in 2012. The measure of adjusted discharges portrays the overall impact of inpatient and outpatient volume.
’10 ’11 ’12
’10 ’12
’10 ’12
“Some of that we believe was due to confiOperating
Revenue Adjusted
losses
discharges
dence in the health care community,” Roe
said. “We were beginning to spend capital
Source: Cost Report Data Resources
dollars on the Detroit campus, and physicians and
IFE AS A FOR PROFIT
others saw we were serious
Uncompensated care: Did DMC cut it? Page 11
about investing in the comTurnaround: Revival cleared way for sale, Page 12
munity.”
Better care: DMC made efforts under Vanguard,
$132.2
T
he Detroit Medical Center increased
profitability during its first two
years as a for-profit system owned
by Vanguard Health Systems Inc. and
did so at a faster rate than when it
was a nonprofit system, according to a review
of Medicare cost reports and interviews with
DMC officials.
The DMC disputes the size of the increase
in net income. It believes net income increased 16 percent from 2010 to 2012 rather
than the 130 percent shown by DMC’s
Medicare cost reports that all hospitals are required to file annually.
But there’s no dispute that through a combination of aggressive cost reductions and revenue enhancement, the eight-hospital DMC system cut operating losses 90 percent — a $120
million turnaround — compared with its last
year as a nonprofit in 2010, according to the cost
reports provided to Crain’s by Louisville,
$126.1M
DMC more profitable under Vanguard than
as a nonprofit; reasons, amount debated
Minus one-time payments: $108.9M
A growing
issue
$54.9M
Hospital, Troy, was elected chairperson
of the Region 2 North Healthcare
Coalition Planning Board; Gail Juleff,
R.N., from Beaumont Hospital, Royal
Oak, was elected chairperson of the
Region 2 North Healthcare Coalition
Hospital Subcommittee.
䡲 The following from Beaumont Hospital,
Troy, received awards: Kim Hurst, a
physician assistant, the Twilight
Community
Leadership Award for
her work with Wayne
County Safe, an
organization that
provides care to
victims of sexual
assault; and Nelia
Afonso, M.D., an
internal medicine
specialist, a 2013
Building Michigan’s
Afonso
Health Care Workforce
Award from the Michigan Health Council.
䡲 Harry Wasvary,
M.D., a colorectal
surgeon at Beaumont
Hospital, Royal Oak,
received the Silver
Certificate of
Excellence from the
National Cancer
Institute for
exceptional
achievement in
patient research
Wasvary
enrollments.
䡲 Fritz Port, M.D., a University of
Michigan nephrologist, was selected by
the National Kidney Foundation for the
2014 David M. Hume Memorial Award,
the highest honor the foundation gives to
a distinguished scientist-clinician in the
field of kidney and urologic diseases. He
is a distinguished research scientist and
an emeritus professor of medicine and
epidemiology at Arbor Research
Collaborative for Health.
䡲 Curtis Collins, a
pharmacist
specializing in
infectious diseases
and antimicrobial
stewardship at St.
Joseph Mercy Hospital
Ann Arbor, was
named the 2013
Pharmacist of the
Year by the Michigan
Society of HealthCollins
System Pharmacists.
䡲 David Nerenz,
director of the Center
for Health Policy and
Health Services
Research at Henry
Ford Health System,
was appointed to a
committee of the
National Quality Forum
to be a member of the
expert panel for the
Nerenz
Risk Adjustment and
Socioeconomic Status project.
So how much did profits
improve for the Detroit Medical
Center after it was purchased
by Vanguard Health Systems
Inc. at the end of 2010?
It depends on what set of
numbers you use.
As the chart below shows,
Medicare cost reports provided
by Louisville, Ky.-based Cost
Report Data Resources show
DMC profits rose more than $70
million from 2010 to 2012.
But Phil Roe, Vanguard CFO at
the time, said 2010 net
income was artificially low
because of two one-time
payments: $24 million to
underfunded pensions and a
$30 million fine the DMC paid
to settle fraud allegations.
Roe said the DMC’s profits
were lower still when judged by
generally accepted accounting
principles, but he declined to
provide numbers.
20140120-NEWS--0009,0010,0012,0013-NAT-CCI-CD_--
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11:41 AM
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Page 2
January 20, 2014
Health Care
DMC: More profitable as for-profit; how much is the question
■ From Page 9
Joshua Nemzoff, president of
Nemzoff & Co., a New Hope, Pa.-based
consulting firm, said most nonprofit
hospitals improve profitability during the first two years under investor-owned management.
One of the reasons that nonprofit hospitals join large for-profit
systems is to achieve economies of
scale, Nemzoff said.
“DMC was able to reduce costs
because of Vanguard’s purchasing
power,” he said.
Even so, “the magnitude of the
improvement was pretty dramatic,
especially since it was done at an in-
Tell us what you think.
2014
2014
BUSINESS OUTLOOK SURVEY
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ner-city hospital in Detroit,” said
Nemzoff, an expert in advising nonprofit hospitals in mergers and acquisitions.
Path to profits
At the time of the sale to Vanguard, the DMC was profitable, generating cumulative net income of
about $230 million from 2004 to 2010
under then-CEO Mike Duggan, now
Detroit mayor. But that still is less
than the $247 million in net income
Vanguard generated in just two
years of operation after the Dec. 31,
2010, sale, according to DMC executives, outside experts and audited financial statements obtained by
Crain’s.
“They improved gross revenue
with a somewhat better payer mix.
They increased outpatient revenues and reduced write-offs,”
said Tom Schuhmann, senior vice
president of finance at Cost Reports Data, who analyzed the
DMC’s cost reports for Crain’s.
“DMC had a significant decrease
in operating expenses in 2011 — $34
million or 2 percent,” Schuhmann
said. “They operated the hospital
like a for-profit. They couldn’t have
had these results” if it were business as usual, he said.
While Roe disputed the Medicare
cost report trends, he said Vanguard was able
to help the DMC
cut costs dramatically by negotiating more favorable contracts
with third-party
vendors, managed care payers,
and medical and
pharmaceutical
Roe
suppliers.
“We identified operating expense
efficiencies, making capital investments and taking care (of patients)
in cost-efficient ways,” Roe said.
And there may have been other
reasons.
Keith Pitts, who was vice chairman of Vanguard and now holds the
same position at Tenet, said the
DMC reduced costs in a number of
ways under Vanguard. But he said
Medicare cost report data do not account for DMC expenses picked up
by Vanguard’s corporate office in
2011.
“There were a huge amount of
(expenses) running through the
home office” in 2011, Pitts said.
Some of the DMC costs that
shifted to Vanguard include interest expenses, pension expenses, legal services, internal audit, some
accounting and Medicare compliance, Pitts said.
Said Roe: “We still allocated proportionate amounts of services to
DMC, but the total costs went
down.”
Staff cuts
In 2011 and 2012, Crain’s reported
several management decisions that
also helped to reduce expenses.
For example, the DMC cut costs
by severing a long-standing relationship in early 2012 with the
Reynolds Group, a medical group
composed mostly of radiologists at
Wayne State University, and con-
HOSPITAL NET INCOME IN MILLIONS
2012
$126
$108
$72.3
$58.9
$53.1
$39.6
$(8.2)
Detroit Medical Center
Beaumont Health System
St. Joseph Mercy (6/30)
St. John Providence (6/30)
Henry Ford Health System
Oakwood Healthcare
University of Michigan (6/30)
2011
$121
$35.5
$91.1
$83
$62.9
$16.8
$249.3
Sources: Hospital systems, Medicare cost reports
Note: All hospital systems’ fiscal year ended Dec. 31 unless noted. The fiscal year for St.
Joseph, St. John Providence and University of Michigan ends June 30.
tracting with Imaging Advantage
LLC, a Santa Monica, Calif.-based
radiology group.
In July 2012, the DMC reduced
staff expenses by cutting the number of nurse midwives and eliminating clinics at Hutzel Women’s
Hospital, where at least seven of the
nurses treated their own patients.
Many of the DMC midwives were
recruited to join Oakwood Healthcare in Dearborn.
The DMC’s former midwife
group had full medical staff privileges to see patients in their own
offices within the medical center.
The remaining midwives at the
DMC now have privileges to support only private obstetricians,
who reportedly pushed the medical center to make the changes.
Beginning in 2011, the DMC began a review of labor productivity
and lean processing at its eight
hospitals that cut costs. The reviews led to an unspecified number of layoffs and dozens of other
positions left unfilled.
DMC Sinai-Grace Hospital, for example, laid off 20 nonclinical employees, Crain’s reported.
“Labor costs were reduced.
There were some staffing reductions in nonpatient care areas,”
Roe said.
However, he said, the the DMC’s
full-time-equivalent
staff
increased 2 percent in 2011, to 14,129
from 13,822. In 2012, the DMC cut
staff 1 percent, to 13,984. Last year,
it cut staff again by 2 percent.
Cost cuts
In its first year as a for-profit
hospital under Vanguard ownership, the DMC cut operating expenses 1.9 percent, to $1.719 billion
in 2011 from $1.753 billion in 2010.
That amount is fairly typical after
for-profit chains take over nonprofits, Schuhmann said.
“Operating expenses were reduced mainly by controlling labor
costs … probably eliminating a lot
of contract labor and overtime
hours,” he said.
For example, the percentage of
wage and related expenses to total
operating expenses at DMC Detroit
Receiving Hospital dropped to 63.5
percent in 2012 from 70.1 percent
in 2010. Other DMC hospitals had
similar reductions except for the
DMC Rehabilitation Institute of Michigan, which increased its percentage of wages to operating expenses
to 84 percent from 70 percent.
Total hourly wage rates at Detroit Receiving dropped to $34.41 in
2012 from $36.26 in 2010, and DMC
Harper University Hospital dropped to
$33.20 from $36.70, the federal cost
reports said.
However, Roe said the decrease
in hourly rates primarily was due
to removing employed physicians
from the DMC’s labor costs.
“We moved all employed physicians into a 501(a) entity under the
tax code” starting in 2011, Roe said.
(A 501(a) is a nonprofit health entity that hospitals create to manage
employed physicians.) Roe added
that the reduction in labor costs
compared with 2010 made it look
like hourly rates were lowered.
“We no longer were allowed to include physician-employed activity”
in hospital cost reports, he said.
Roe said average hourly wage
rates of the remaining employees
and nurses increased 7 percent, to
$29.27 in December 2012 from
$27.33 in January 2011.
Nemzoff said for-profit hospitals
typically cut labor expenses when
they change ownership.
Average labor costs of for-profit
hospitals are much lower, at 38
percent to 42 percent of revenue,
than nonprofit hospitals, at 50 percent to 55 percent, he said.
“There are a lot of components of
labor,” Nemzoff said. “For-profits
start to cut overtime, agency usage,
benefits; they convert people from
full time to part time; and they do a
better job at flexing people off.”
Flexible staffing allows hospitals to
send home workers during their
shift when patient volumes decline.
Vicki Bryan, an analyst with
New York City-based Gimme Credit,
said Vanguard knew it needed to
address high staffing costs within
its hospital group.
In 2011, staffing costs at Vanguard’s 28 hospitals, including
DMC hospitals, were 56 percent of
net revenue, at the high end in the
for-profit industry.
“These numbers were mostly
driven by higher labor costs at the
DMC hospitals,” Bryan said.
By 2012, Vanguard had reduced
companywide labor costs to 46 percent, she said.
“DMC is doing better (financially) than it was — but compared to
what?” she said. “DMC is still losing money on patient care operations” — a $12 million loss in 2012.
Financial data for the DMC were
unavailable for 2013.
Revenue gains
By year two under Vanguard, the
DMC improved on its first-year
profit as a for-profit system mostly
by generating a 3.9 percent increase
in net revenue to $1.723 billion.
At the time, Duggan told Crain’s
that the DMC was generating higher
See Next Page
20140120-NEWS--0011,0012,0013-NAT-CCI-CD_--
1/17/2014
11:43 AM
Page 1
January 20, 2014
Page 11
Health Care
Did the DMC maintain charity
care? Depends on the numbers
From Previous Page
revenue and profits from surgery,
cardiology and children’s services.
The DMC “improved gross revenue with a somewhat better payer mix (less Medicaid and more
commercial insurance) and increasing outpatient revenues
while reducing write-offs (bad
debt),” Schuhmann said.
Roe said write-offs declined because the DMC further improved
its revenue collection from patients and commercial payers.
Over the past two years, the
medical center has continued to
reduce costs by continuing to better control supply costs, vendor
contracts and economies of scale,
said Joe Mullany, the DMC’s CEO.
Last March, Mullany announced
B UILT
F INANCIAL S OLUTIONS
ON G ENERATIONS OF T RUST
$255.4
’12
$235
’11
’10
’12
$143.7
’12
$121.2
’11
$261.7
’10
$243
$73.1
$228
The following is the amount of uncompensated care provided by the Detroit Medical Center
and its primary competitors. Figures, in millions, are provided by the health systems.
$74
One worry some had when the
Detroit Medical Center became a forprofit was that the health system
would reduce the amount of uncompensated care it provides.
The numbers aren’t clear if that
has happened.
Numbers provided to Legacy
DMC, the nonprofit organization
formed to monitor the 2010 sales
agreement with Nashville, Tenn.based Vanguard Health Systems Inc.,
show that uncompensated care increased 14.7 percent from 2010-12.
That’s less than the 18.5 percent
increase shown by Henry Ford Health
System, but more than St. John Providence Health System at 8.7 percent.
Henry Ford and St. John are primary competitors to the DMC because
of their flagship hospitals in Detroit.
Officials for Henry Ford and St.
John declined to comment for this
story other than to provide the uncompensated care data.
But according to Medicare cost
reports for the DMC, uncompensated care was reduced by $6.5 million,
or 8.2 percent, from 2010 to 2012.
Because of incomplete data, uncompensated care — which includes bad debt and charity care —
for DMC Children’s Hospital and DMC
Rehabilitation Institute of Michigan
were excluded.
The main difference between
the Medicare-reported uncompensated care numbers and Vanguard’s, said Phil Roe, DMC CFO
under Vanguard, is that Medicare
cost reports use a different method
for estimating bad debt and charity care, based on a complicated
cost-to-charge formula that is supposed to reflect a hospital’s actual
costs of service delivery rather
than what it charges patients.
The figures the health system
uses for other purposes are based
on generally accepted accounting
principles, or GAAP. Roe said a
GAAP requirement was that insurance company payment denials, which were counted as bad
debt when the DMC was a nonprofit, instead had to be counted as an
UNCOMPENSATED CARE
$79.6
BY JAY GREENE
} "
} /-
} #0
$00}!*&}}
’10
’10
’12
*#*#$
Detroit Medical Center
Uncompensated
care as
reported to
Medicare
Uncompensated
care figures
provided by the
health system
Henry Ford
Health System
St. John Providence
Health System
//*0
0*%0&/!*#&+/0&- )3 $
Uncompensated care figures provided by
the health system
insurance contractual adjustment.
“If we had stayed on DMC policy
on how denials were counted, the
bad-debt expense would have been
even higher” after 2010, Roe said.
While
Roe
disputed
the
Medicare cost figures, he gave two
additional reasons why uncompensated care accounting changed
after Vanguard took over.
One is that bad debt related to
the practices of physicians employed by the DMC was not included after 2010.
Another is that Vanguard DMC
also did a better job at collecting unpaid bills from patients and health
insurers. But, he said, as revenue
and patient volumes increased,
overall bad-debt totals also increased.
As a condition of the sale to Vanguard, DMC agreed to maintain indigent and low-income charity policies, provide core clinical services
and not sell any of DMC’s hospitals
for at least 10 years. Vanguard said
it would implement its charity care
policies, which were more generous than the DMC’s, officials said.
Early each summer, Legacy
DMC issues a public report to the
state attorney general’s office on 10
key areas, including uncompensated care, capital spending and maintenance of critical core services.
In its 2012 annual report, Legacy
DMC said DMC increased the
amount of uncompensated care 7
percent, driven by a jump in charity
care of 16 percent, the report said.
However, DMC has steadfastly
declined to make public the actual
dollar numbers and marked the accounting section confidential, the
Legacy DMC report said.
Marjorie Mitchell, board member
of the Coalition to Protect Detroit
Health Care, said she thinks DMC has
consistently reduced uncompensated care over the years, including
when Vanguard took over, based on
anecdotal information she has received from former employees.
“We have had meetings with
Legacy DMC (officials) and
haven’t been able to get the metrics on charity care. They tell us
that information is confidential,”
said Mitchell, who also is executive director of MichUHCAN, a community group providing education
for people to enroll in Obamacare.
“There is no good way for the
people of Detroit to find out how
(the sale) has affected charity
care,” she said. “They do not show
us charity care provided.”
Dick Widgren, Legacy DMC’s
chairman, said Legacy DMC also
gets feedback on uncompensated
care from active physicians at
DMC and at least one competing
hospital system.
Widgren acknowledged that
DMC reduced uncompensated care
in the three years leading to the
sale to Vanguard.
the layoffs of 300 full-time-equivalent staff or 2 percent of the DMC’s
workforce. He said the layoffs were
prompted by a 2 percent reduction
in Medicare payments.
“Our caregiver (nurse-to-patient)
ratios have not changed,” Mullany
said. “Everything we have done as
an organization since Vanguard
(took over) has been to allocate
more resources to the bedside.
There is more contact with the patients.”
He said the workforce reductions eliminated duplicate and
overlapping positions and corporate overhead costs.
Last May, Mullany began daily
lean management walks, where
administrators walk the floors of
DMC hospitals to listen to employees talk about how they would go
about reducing costs.
“The benefits are in elimination
of waste and inefficiencies, improvement in quality. We are driving out
costs at the lowest level,” he said.
On the revenue side, Mullany
said, the DMC’s revenue continues
to increase despite a hospital market that is shrinking in total revenue. He cited growing areas that
include neurosurgery, cardiology,
outpatient services, rehabilitation
and reference laboratory services.
“We have improved coding, collecting, all things that help with
revenue,” he said. “We are improving our mix of patients, working
with specialists and focusing on
necessary services.”
Jay Greene: (313) 446-0325,
[email protected].
Twitter:
@jaybgreene
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20140120-NEWS--0009,0010,0011,0012,0013-NAT-CCI-CD_--
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Page 12
11:03 AM
Page 4
January 20, 2014
Health Care
DMC turnaround under Duggan set stage for sale
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The fact that the Detroit Medical
Center was able to be sold was the
result of a turnaround plan several
years in the making under the
leadership of then-CEO Mike Duggan.
Duggan took the helm in 2004
with the directive to turn operations
around
with the aid of a
$50 million state
bailout.
The bailout
came after the
DMC had lost a
cumulative
$462
million
from 1998-2003,
mostly under the
Duggan
direction of former CEO Arthur Porter, who was
named last year in an international
arrest warrant on charges of hospital corruption in Quebec.
Duggan cut overhead costs, increased emergency department
volume, renegotiated a teaching
contract with Wayne State University School of Medicine and made it financially and operationally attractive for private physicians to
admit to DMC.
From 2004-2010, the DMC generated cumulative net income of
about $230 million, but by 2009,
Duggan had realized that the
health system would not be able to
generate enough cases to fund
long-overdue capital improvement
and expansion plans the hospital
system needed to compete against
Henry Ford Health System, St. John
Providence Health System, Beaumont
Health System and others in Southeast Michigan.
The health system began quietly
shopping for a buyer.
In March 2010, the DMC announced it would be acquired by
Nashville-based Vanguard Health
Systems Inc. in a $1.5 billion deal
that included $417 million to retire
debts and $850 million for new and
routine capital projects over five
years. DMC also promised to maintain charity care policies and not
shut down hospitals or reduce critical services for 10 years.
After serving two years as
DMC’s CEO under Vanguard, Duggan resigned in December 2012 to
campaign for mayor of Detroit. On
Oct. 1, Dallas-based Tenet Healthcare Corp. completed its acquisition of Vanguard and DMC in a
$1.8 billion deal.
Crain’s made several requests to
interview Duggan during the development of this article. Through
a spokesman, Duggan declined to
talk about DMC now that he is
mayor of Detroit.
— Jay Greene
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20140120-NEWS--0009,0010,0011,0012,0013-NAT-CCI-CD_--
January 20, 2014
1/17/2014
11:05 AM
Page 5
Page 13
Health Care
DMC made efforts under Vanguard to improve care
BY JAY GREENE
Detroit Medical Center’s CEO Joe
Mullany said the health system
put several initiatives in place to
increase quality of care since it became an investor-owned hospital
system in 2011.
Suzanne White, M.D., DMC’s
chief medical officer, said reducing medical errors and improving
patient safety have been the top
priority.
“We know we have areas for improvement,” White said. “There
were significant changes when we
became part of Vanguard.”
White said DMC instituted the
Safety for Life program under former CEO Mike Duggan, who now
is mayor of Detroit. For example,
all 14,000 employees in early 2012
went through quality training.
Mullany said that quality has
been maintained or improved
throughout DMC since it became
investor-owned.
That’s hard to measure, given
the dozens of publicly available
quality and patient safety measures to analyze.
On the one hand, DMC Harper University Hospital and DMC Detroit Receiving Hospital — two of DMC’s
largest hospitals — scored lower
than Michigan averages in most
patient experience questions on
www.hospitalcompare.hhs.gov,
one of a number of growing websites people can visit to research
hospital quality.
On the other hand, the two hospitals also received higher or similar quality scores for readmissions, complications and inpatient
deaths than U.S. averages.
For example, the death rate for
heart failure and pneumonia patients at Harper was lower than
the U.S. average of 11.7 percent.
Mullany said he is aware of the
lower than average scores on hospitalcompare.gov, and DMC is
working hard to improve patient
experiences.
“For the patient experience, the
score behind the scenes is good relative to others, but it is not where
we want it to be,” Mullany said.
White said DMC hospitals have
improved quality in several areas.
For example, mortality rates,
complication rates, medication errors and hospital acquired infections, including sepsis, have gone
down, White said. She did not provide specific numbers.
“Our (50) core (quality) measures have gone up, readmission
rates have gone down (2010-2013),
and our patient safety events have
dropped,” White said.
DMC also has maintained its
high ranking in at least three national quality scorecards. They are
the The Leapfrog Group, U.S. News
and World Report’s Best Hospitals
list and Most Wired by Hospitals
and Health Networks, an American
Hospital Association publication.
DMC’s four qualifying acutecare hospitals have received A
grades on patient safety the past
several years from Leapfrog, an organization formed by large compa-
nies to monitor patient safety. The
DMC hospitals include Hutzel
Women’s Hospital, DMC Huron ValleySinai, and DMC Sinai-Grace.
The DMC also has received the
AHA’s Most Wired hospitals
recognition that measures hospitals’ implementation and use of information technology.
Mullany said measuring and reporting quality is one of his top
priorities because he envisions a
day where the public and employers will have access to everything
a hospital does.
“I have preached that we need to
be prepared for the day when
everything is known (about hospitals) from a quality, safety and cost
standpoint, he said.
Mullany said he learned valuable lessons administering hospitals in Massachusetts from 2005 to
2012, mostly under Romneycare,
the state’s health reform program
that was partially the model for
the Affordable Care Act.
“Everything (in Massachusetts)
is more transparent” with quality
data publicly available, Mullany
said.
“The health care industry has
fought for many years data transparency. They say it is misleading
to customers,” he said. “I believe it
brings better compliance and makes
sure we all do our jobs for patients.”
Jay Greene: (313) 446-0325,
[email protected]. Twitter: @jaybgreene
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Letters of intent
䡲 Providence Hospital and Medical
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catheterization lab; $4.4 million.
䡲 University of Michigan Health
System, Ann Arbor: Renovate University Hospital’s emergency department and operating room suite
and the fifth floor of the Neuroscience Hospital; $36.5 million.
System, Ann Arbor: Renovate and
replace 16 pediatric psychiatric
beds in C.S. Mott Children’s Hospital;
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Applications received
System, Ann Arbor: Add one incremental operating room to the
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䡲 Madison Surgery Center LLC,
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room; $2.1 million.
Decisions
䡲 Harper University Hospital, Detroit: Relocate six cardiac catheterization labs from Harper University
to a new cardiovascular and multispecialty center attached to the hospital; $2.7 million. Approved.
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20140120-NEWS--0014-NAT-CCI-CD_--
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January 20, 2014
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lated to app advances that increase
connectivity in cars, and the need for
a seamless transition between devices
from automobile to home. Baldwin
Theatre, Royal Oak. $25 members, $35
nonmembers. Contact: (313) 872-7850;
website: www.adcraft.org.
The New Dashboard. 6-9 p.m. Jan. 28.
Adcraft Club of Detroit. Learn about
the advertisement possibilities resulting from the technological changes re-
reau’s
annual
meeting will focus
on Detroit’s comeback. With Faye
DUGGAN: CRAIN’S NEWSMAKER
OF THE YEAR FOR 2013
Detroit: America’s Great Comeback
City. 9 a.m.-noon Jan. 29. Detroit Metro
Convention & Visitors Bureau. The bu-
Alexander Nelson,
outgoing
president and CEO, De-
troit RiverFront
Conservancy, who
has been named
president of the
DTE Energy Foundation and vice
Nelson
president of public
affairs for DTE Energy Co., effective
Feb. 17; Deb Dansby, vice president,
Rock Ventures LLC; Sue Mosey, president, Midtown Detroit Inc.; Melissa
Roy, assistant county executive, Macomb County; Bridget Russo, marketing director, Shinola; and Christy
McDonald, MiWeek anchor, WTVSChannel 56. Cobo Center, Detroit. $45
members, $50 nonmembers. Contact:
Yolanda Michaux, (313) 202-1852; email:
[email protected]; website:
www.visitdetroit.com.
The State of Michigan Business: A Conversation Over Lunch with Gov. Snyder.
11 a.m.-1 p.m. Feb. 7. Detroit Regional
Chamber. The governor will outline
his plans for 2014
and continued efforts to move
Michigan forward
as the nation’s
comeback state.
MGM
Grand
Detroit, Detroit.
$45 Detroit chamber members, $150
nonmembers. Contact: Marianne AlSnyder
abastro,
(313)
596-0479;
email:
[email protected]; website: www.detroitchamber.com.
PEOPLE
CONSTRUCTION
Ray Elliott to manager of industrial
business development, infrastructure
and environment division, URS Corp.,
Southfield, from interim vice president, business development, Arbor
Advisors LLC, Ann Arbor.
ENTERTAINMENT
Jim Ross
Ryan Ross
Jim Ross to executive vice president
of business operations and strategy, Palace Sports
& Entertainment
Auburn
LLC,
School of Business Administration
business.wayne.edu
AIM HIGHER
Kubica
Siebert Brandford Shank & Co. LLC,
Detroit, which provides municipal
underwriting
and financial
advisory
services to
state and local
governments,
has named
Sean Werdlow
as its first
COO. He had
been managing
director.
Werdlow
Werdlow, 46,
earned a bachelor’s degree in
corporate finance from Wayne
State University.
Schwartz Investment Counsel Inc.,
Plymouth, from executive vice president. Also, Cathy Stoner to vice president, from operations manager; Laura
Preston to director of operations, from
assistant operations manager; and
Robert Schwartz to vice president,
Schwartz Investment Trust. He continues as vice president.
LAW
Houissa
Paul A. Glantz, BA ’80
CEO, Proctor Financial
Chairman, Emagine Entertainment
Walsh
IN THE SPOTLIGHT
Hills, from senior
vice president of
business development, Cleveland
Browns,
Cleve-
land, Ohio. Also, Mehdi Houissa to finance director, from director of strategy and finance, Great Lakes Division,
Wal-Mart Stores Inc., Detroit; Joe
Walsh to vice president of human resources, from senior vice president,
global human resources, Taylor Made
Golf Co. Inc., Carlsbad, Calif.; Ryan
Ross to video systems manager, from
production supervisor, Flint Journal,
Flint; Sara Kubica to fan experience
manager, from account manager, Universal McCann, Birmingham; Jason
George to creative director, programming and production, from director,
creative group; Nick Bartolone to director of advertising and promotions,
from promotion manager; Lauren
Miller to senior director of marketing,
from director of fan lifestyles; and Buddy Rose to director of game entertainment, from game entertainment manager.
FINANCE
Richard Platte Jr. to president,
Cunningham
Patel
James Cunningham to partner, Warner Norcross & Judd LLP, Clinton Township office, from senior counsel; and
Jeena Patel to partner, Southfield office, from associate.
NONPROFITS
The Rev. Bill Fleming to rector,
Mariners’ Church of Detroit, from acting rector.
SERVICES
Brian Chermside to COO, Resinate
Material Group Inc., Plymouth Township, from corporate vice president
and chief commercial officer, Dow
Corning Corp., Midland.
REAL ESTATE
Robert Horne to senior vice president,
investments, Redico LLC, Southfield,
from founder and principal, Dodge
Capital LLC, Winnetka, Ill.
20140120-NEWS--0015-NAT-CCI-CD_--
1/17/2014
7:10 PM
Page 1
January 20, 2014
DIA: A special case for foundations
■ From Page 1
derfunded city pension funds and
the preservation of the DIA art —
seemed nontraditional, and impossible, at first.
“These are not easy decisions,
with the scale needed and the complexity of the situation,” said Community Foundation for Southeast Michigan President Mariam Noland.
“Normally, foundations like
everything nailed down ... and
clear. This is complex, it’s moving
and hanging.”
But “in the end, it’s the right
thing to do.”
And it’s still a moving target, as
negotiations continue on whether
the state of Michigan will participate as a $350 million funder alongside the nine foundations contributing upward of $330 million —
and whether the DIA itself will be
required to pony up a contribution.
But the commitment from the
foundations announced last week,
and the considerations weighed by
board members, were partly driven
by a desire to prevent investment in
the city the foundations have already made from being eroded.
Providing such assistance to help
solve municipal issues is not the
way the foundations had done business before, but Detroit presented a
unique set of circumstances, Rapson said. They range from the city’s
bankruptcy to preserving the DIA
collection and the foundations’ existing commitments that include
supporting cities and culture.
The trustees of the Ford Foundation immediately embraced the plan
because it was Detroit, President
Darren Walker said.
“We might not consider another
city in America where we don’t
have a legacy and heritage,” but
the foundation’s capital was made
in Detroit, and it is inextricably
linked to the city, he said.
Rosen is mediating the complex
deal. A statement from bankruptcy
mediators last week said the foundations’ support has leveraged additional commitments, including a $5
million gift from A. Paul Schaap, a
former chemistry professor whose
work led to the founding of Southfield-based Lumigen, and 130 individual contributions to a subsequent
fund set up at the Community Foundation for Southeast Michigan.
Under the foundations-led plan,
the DIA’s assets would be spun off
to the nonprofit that operates the
museum. Leading the effort are
the Community Foundation, Kresge, the Ford Foundation and the
Miami-based John S. and James L.
Knight Foundation.
Other foundations that have
made commitments include the
William Davidson Foundation, Fred A.
and Barbara M. Erb Family Foundation, Hudson-Webber Foundation, McGregor Fund and the Flint-based
Charles Stewart Mott Foundation.
Related missions
For Kresge, which has supported the arts in Detroit, Detroit Future City efforts, M-1 Rail and entrepreneur support through the
New Economy Initiative, the plan was
a fit. But trustees wanted to ensure
Kresge could participate without
damaging other commitments and
understand how it would pay for
it, Rapson said.
Kresge decided to come in at a
high level with a $100 million com-
State’s payment to plan still up
in air; DIA balks at $100M ante
As of Jan. 17, support for Gov.
Rick Snyder’s plan for $350 million in state funding to augment
the $330 million committed so far
by foundations was uncertain, as
was the amount the DIA itself may
be required to contribute.
Reports of a requirement that
the DIA contribute $100 million
over 20 years or $5 million a year
to the plan surfaced late last week,
an amount DIA Chairman Eugene
Gargaro said isn’t doable.
“Of course we want to participate and help; that’s a given,” he
said. “But I’m not going to saddle
the DIA with debt that will jeopardize its ability to function.”
Gargaro said the museum already raises $12 million each year
to supplement $23 million in millage revenue from Wayne, Oakland
and Macomb counties for its annual budget, Gargaro said.
mitment over 10 years, given the
need mediators had stated to frontend the fund so immediate payout
requirements could be met. And to
fund that commitment, its trustees
approved tapping into the foundation’s $3.3 billion endowment, at
least initially, something Rapson
doesn’t believe had ever been done.
Ford Foundation trustees wanted
assurance that support would flow
to pensioners, that it would secure
transfer of DIA assets to an independent entity and that the fund would
have sustained administration over
the next 20 years, Walker said.
The foundation’s trustees agreed
to contribute $125 million, an
amount that won’t cannibalize its
ongoing grant making to organizations including Midtown Detroit, the
Charles H. Wright Museum of African
American History, the Detroit Historical
Society and The Henry Ford, he said.
The Ford Foundation, which has
a $500 million annual grant making
budget, hasn’t yet determined over
what period of time it will pay its
commitment, but it will be less
than 20 years, Walker said, adding
that it won’t require the invasion of
endowment principal.
Like other foundations, Ford’s
trustees discussed whether making the commitment would set a
precedent that other distressed
cities might use to make a case for
their own support, Walker said.
“But they feel comfortable that
the unique relationship between
the Ford Foundation and the city of
Detroit is not replicable,” he said.
Long-term fix
Given its goal of improving the
quality of life in metro Detroit, the
Community Foundation viewed
the opportunity to help move the
banks into a mediated settlement
in a reasonable amount of time as
good for the region, Noland said.
“That means it’s done, with no
potential litigation for years and
years, and it lets the city move
ahead,” she said.
That was a big piece of the foundation’s decision to contribute an
undisclosed amount over 20 years,
And the millage revenue isn’t
available for the fund. Per the
agreements between the arts authorities in the three counties
and the DIA, that revenue can
only go to fund the museum’s operations, and the museum must
provide regular reports to the authorities on its use, he said.
Gargaro told Crain’s that in exchange for a state contribution,
the museum could relaunch the
statewide outreach it provided in
the 1990s when it was receiving
$14 million a year from the state.
The museum loaned art to other
cultural institutions around the
state, took exhibitions statewide,
provided conservation expertise
to other museums and consulted
on arts education programs until
its state funding was cut in the late
1990s to early 2000s.
— Sherri Welch and Chris Gautz
but certainly protecting the art
and helping the pensioners were
also pieces of it, Noland said.
Alberto Ibarguen, president of
the private Miami-based John S.
and James L. Knight Foundation said
the Knight Foundation’s board approved its largest single grant
commitment of $30 million to the
DIA plan over 20 years, funded
through its regular grant budget.
It talked about the same things
as other foundation boards as it
considered joining the effort, including whether it met the intent
of its founders. Knight seeks to
support democracy through an informed, engaged citizenry.
It’s extended that to funding for
wireless accessibility in Detroit and
other major cities, the economic development efforts spearheaded by
the New Economy Initiative and the
$9 million Knight Arts Challenge
Detroit, a three-year effort to spur
public arts installations.
“To the extent that we can do
something to help get the city out
of distress was also of interest,”
Ibarguen said.
Knight’s board had the good fortune to have held its September
board meeting in Detroit, he said.
It was able to talk with Emergency Manager Kevyn Orr, with
no mention of the DIA fund which
had not yet been dreamed up.
It announced its initial round of
arts challenge grants and had a
chance to talk with voters as they
prepared to choose a mayor.
Those things gave the foundation’s trustees enough basis to consider and approve the idea of participating in the DIA fund in just
one afternoon in December.
Ibarguen said he thinks there
are concerns with the foundations
contributing to the DIA plan. It’s
important that the plan not give
the impression that foundations
are in the business of bailing out
municipalities.
“This really does present a
unique set of circumstances, all of
which have been triggered,” he said.
Sherri Welch: (313) 446-1694,
[email protected].
Twitter:
@sherriwelch
Page 15
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20140120-NEWS--0016,0017-NAT-CCI-CD_--
1/17/2014
6:13 PM
Page 1
Page 16
January 20, 2014
Rizzo: Growing waste hauler awaits Detroit contract work
■ From Page 3
Another is that neighboring St.
Clair County may open its borders
to accept Macomb waste soon to its
own Smiths Creek Landfill, in a deal
that is expected to create more market competition for the Waste Management Inc.-owned Pine Tree Acres
landfill in Lenox. Pine Tree is currently Macomb’s only open landfill.
“We were concerned about a monopoly (by Waste Management),
and amending our request might
create the same result,” Rizzo said.
“This change now helps create the
market competition effect of having another landfill in the county,
but without the cost of adding another landfill.”
Jeffrey Bohm, chairman of the St.
Clair County Board of Commissioners,
confirmed that the county has reviewed landfill operations with consultants and should “very soon”
consider a proposal to amend its solid waste plan and allow waste imports from Macomb and Lapeer
counties.
Traditionally a closed county, St.
Clair has seen collection at its only
active landfill dwindle from about
370,000 tons in 2003 to about 170,000
tons today, largely due to plummeting commercial waste contributions among its local businesses.
That brings Smiths Creek to about
a break-even operation, he said,
and the county has been looking at
waste imports to bolster profitability.
“The volumes are way down, and
we are looking for a way to get our
waste streams stabilized,” Bohm
said. “Sometimes you have communities that don’t address that issue
until it’s become a problem. We’re
trying instead to be very proactive.”
Rizzo said his company, cofounded in 1998 with his father,
Charles Rizzo Sr., maintains a business mix of about 60 percent municipal contracts and 40 percent commercial waste collection contract
with large manufacturers and other companies.
Its parent company, Rizzo Group,
is co-owned by father and son along
with CEO Michael Ferrantino Jr. of
EQ – The Environmental Quality Co. in
Wayne; New York City-based private equity firm Kinderhook Industries; and Habib Mamou, president
of V&M Corp., doing business as Royal Oak Recycling.
Rizzo Environmental has grown
steadily through a mix of new residential contracts and business acquisitions, and the company claims
it has never lost a municipal contract since Hamtramck became its
first customer in 2001.
When Kinderhook acquired its
stake in Rizzo Group in 2012, revenue was about $23 million, Chuck
Rizzo said. This year, it should exceed $70 million, even before it begins servicing two out of four geographic zones of Detroit.
Rizzo Environmental in November acquired Royal Oak Recycling
(Chuck Rizzo estimates the target
company revenue was almost $20
million) and in July it won the residential hauling contracts for Eastpointe, Roseville and St. Clair
Shores away from Waste Management of Michigan, a subsidiary of
Houston-based Waste Management.
The company also picked up contracts for more than a half dozen
Oakland County communities and
the management of a Warren transfer station out of the 2012 bankruptcy of Flint-based Richfield Equities
LLC, which converted to a Chapter 7
liquidation last February.
Chuck Rizzo and Charles Rizzo
Sr. told Crain’s the company won
its first municipal contract for
Hamtramck in 2001 and has since
grown to provide services to 32 local communities in Wayne, Oakland and Macomb counties.
Adding the Detroit contract is expected to require Rizzo to buy about
40 new vehicles and add 55-60 new
jobs, and could add $10.5 million to
$11 million in additional yearly revenue, meaning 2014 revenue could
approach $80 million depending on
when Detroit service begins.
Contract terms are still being finalized, although Chuck Rizzo
said the company could start as
early as February.
The company also claims a better
than an 80 percent success rate on
recent municipal bidding against
its competitors. Chuck Rizzo credits that track record in part to being
a local company without the added
overhead costs of Waste Management, Arizona-based Republic Services Inc. and other competitors that
also maintain landfills, recyclable
materials recovery centers and other nonhauling operations.
The company also has sometimes
aggressively pursued new business,
even submitting unsolicited bids in
the past for St. Clair Shores and Harrison Township. Last fall, it submitted a similar bid to Rochester Hills,
and even tried a local politics tactic:
contacting a citizens’ watchdog
group that organized robocalls to
residents after that company renewed a Republic Services contract
without competitive bidding.
Because of the corporate growth,
Rizzo recently acquired 6 acres of
land adjacent to its 40,000-squarefoot garage and office building in
Sterling Heights, where it has been
based since 2005. Chuck Rizzo said
the company hopes to open a new
services center in Pontiac by June
if it can clear some Oakland County
regulatory approvals in the next
few months, but it isn’t short on vehicle fleet space.
“There’s plenty of capacity
here” at Sterling Heights, he said,
adding that even with Detroit, the
location won’t be more than 80 percent full. “And at this location,
we’re not near very many residential neighborhoods to have concerns about noise or the early
morning starts.”
Rizzo Environmental also has a
bid pending to add Southgate to its
waste hauling contracts, and plans
upcoming bids on Harrison Township and Washington Township as
well as possible acquisitions this
year, Rizzo said.
Tom Horton, government affairs
manager for the Michigan, Indiana
and Ohio region of Waste Management, said the new Rizzo and Advanced Disposal contracts simply
prove the Detroit area “has always
been a robust, competitive marketplace” for waste haulers, and that
competition should continue.
He also said a new $15 million
plant that converts landfill gas
from the Pine Tree Acres landfill
into electricity has helped establish
Waste Management as the largest
producer of landfill energy in the
Midwest.
That plant, completed in 2012, expanded the landfill’s power output
capacity from 8.8 megawatts to 21.6
megawatts, enough to power about
17,000 homes. Horton also disputes
Rizzo’s contention that Pine Tree
Acres has a monopoly on Macomb
waste disposal due to its location
and limitations on waste exports.
“These are guidelines, not restrictions, on moving waste in the
county’s (solid waste management)
plan, and these (Rizzo’s) allegations
that restrictions exist are simply
without evidence,” he said.
Horton said commercial waste
collection in Detroit remains a
thriving Waste Management operation.
The company handles recycling
and hauls paper and cardboard
waste for reuse for General Motors
Co. at the Renaissance Center headquarters, under a zero-landfill conversion plan the automaker completed at its headquarters complex
in December. But Royal Oak Recycling, now a Rizzo company, also
bales and ships paper from the RenCen to be resold as material and cereal box and tissue paper.
Both Rizzo and Advanced Disposal, the company awarded the other
half of the Detroit contract, are expected to send waste to the Detroit
incinerator. The city is being divided into east and west collection
zones as part of the contract.
Detroit Renewable Power President John O’Sullivan confirmed
the two new waste contractors recently informed his company they
will send all Detroit waste to the
plant, either directly or by way of a
Southfield transfer station.
“It’s my understanding that’s
the city’s choice, though we
haven’t had much direct communication from the city recently,”
O’Sullivan said. “That may change
soon, though, since a new mayoral
administration is in and we expect
to see some new activity now on its
(Detroit’s) operations side.”
Chad Halcom: (313) 446-6796,
[email protected].
Twitter:
@chadhalcom
Trash: New city plan leaves resourceful nonprofit in limbo
■ From Page 3
cling, something that isn’t currently offered.
But the announcement also left
the future of Recycle Here in limbo.
The nonprofit is funded through
an $18,000-a-month contract with the
city, and Naimi said he has not been
told whether it will be extended once
Rizzo Environmental Services Inc. and
Advanced Disposal Inc. take over trash
hauling and recycling in May.
“What we have created is a recycling program in a municipality
that had no infrastructure,” said
Niami. “We identified what works.
We know the people. We have the
data. It’s a best practice. But if the
city stops funding us, Recycle Here
closes its doors.”
The city seems to be uncertain
about Recycle Here’s future. Its
services have not been written
into the contracts with Rizzo or
Advanced Disposal.
“As the city of Detroit expands
curbside recycling opportunities to
all of our residents, the Department
of Public Works will review the current drop-off contract with Recycle
Here and make a determination at
the appropriate time if it is in the
citizens of the city’s best interest to
continue this contract,” said Bill
Nowling, the spokesman for Emergency Manager Kevyn Orr.
Building a business
Matt Naimi came to recycling in
one of those truth-is-stranger-thanfiction ways.
His family owned the warehouse
on Holden Street, which was originally the first Lincoln Motor Co.
warehouse. But in 1997, Naimi had
the chance to take it over if he
could pay off the back taxes. He did
… and then wondered what to do
with to do with the sprawling, unheated infrastructure.
He started by building out a few
music studios in the building because friends were always complaining about the lack of needed practice
space. But you’ll run out of musicians before you run out of space in a
300,000-square-foot bunker.
So when a trash hauling company asked to rent the building, Naimi agreed. He said he went to the
city and got a solid waste transfer
permit, and then signed a five-year
lease. That company, however,
was quickly bought out and closed
by a larger trash hauler. But it
paid out Naimi on the lease.
“So I bought a couple of trucks
and started hauling trash,” Naimi
said. “I don’t do white papers. I
just look at opportunities and
make the most of them.”
He specialized in picking up re-
cycling from construction sites —
“the only way you could compete
with the bigger players was to find
a niche,” he said — and word got
around that he was the man in
town to talk to about greening and
recycling issues.
Still, it caught Naimi by surprise when a woman found him as
he was getting out of his car in the
dark of night.
“She chased me down the street,
yelling that she wanted to start recycling in the Cass Corridor,” he
remembered.
Naimi agreed to install a dumpster outside the Bronx Bar in midtown Detroit, knowing it would be
easy to service on his regular
rounds.
At the time it seemed like a subtle shift, but this one dumpster
would soon become his future.
In late 2005, he was diagnosed
with Crohn’s disease, and he knew
he wanted to get out of the trash
hauling hustle and focus just on
what was becoming Recycle Here.
He sold off the trucks and began
talking to the city about his proposal for handling residents’ recycling and offering education outreach around recycling and how to
access city services.
Recycle Here’s doors officially
opened on Holden Street on Jan. 6,
2007. Fifty people showed up.
In the intervening seven years,
Recycle Here has incorporated into
a nonprofit, Green Living Sciences,
and grown from being open two
days a week to three at the Holden
Street location (Monday, Wednesday, Saturday). It hosts 1,200 to
1,400 people every Saturday.
It also operates mobile operations in Eastern Market, Indian
Village and Clark Park/Creekside.
The Grandmont Rosedale Development Corp. also contracts with Recycle Here to provide bimonthly pickup service of items it cannot collect
in its all-volunteer program.
Even more important to Naimi
is the educational outreach efforts
in the Detroit Public Schools and
with other groups and small businesses. Recycle Here raises between $4,000 and $6,000 per month
selling off recycling in the commodities markets, and every dollar goes back into the group’s work
to teach kids how to recycle and
how to access city services.
“Our little ‘agents of change’ go
home and encourage their parents,
teach their parents,” said Naimi.
“I’m not trying to save every Styrofoam cup; I’m trying to give
everybody the opportunity to do
the right thing. If you want to be
green, we give you that opportunity. We teach you how.”
‘We grow like a weed’
To fund this work, Naimi has a
secondary
business
selling
biodegradable cups and take-out
containers to local businesses and
national festivals. You’ll find Michigan Green Safe Products in Ford Field
and Avalon International Breads.
The idea grew after local festival
organizers talked to Naimi about
recycling their beer cups. But that
proved almost impossible, short of
policing every trash can. What was
possible, however, was selling them
environmentally responsible cups.
It turned out to be a good gamble.
Green Safe has grown from cups to
more than 450 products and seen
revenue grow at least 35 percent
per year since it was founded in
2007. Last year, it did just more
than $2.5 million in sales.
“We grow like a weed,” said
Steve Harworth, president of Green
Safe. “We do a ton of local, small
companies. We don’t really do the
chains. It’s a small network down
here, and we all know each other.”
Avalon was one of Green Safe’s
See Next Page
20140120-NEWS--0016,0017-NAT-CCI-CD_--
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6:15 PM
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January 20, 2014
Page 17
Caldwell: Could new coach be the Lions’ Mulally?
■ From Page 3
as the Lions’ 23rd full-time head
coach since the National Football
League franchise began play in 1930
— and the 14th coach hired since
owner William Clay Ford Sr. took
over the team 50 years ago this
month.
“He fits our profile to a T,” Lions
President and CEO Tom Lewand
said, without disclosing details
about the contents of that profile.
“When I talk about things like
leadership, experience, a sound
football philosophy, intelligence,
communication skills, integrity, accountability, discipline — those are
the kinds of things that time in and
time out we heard when people
were describing Jim Caldwell,”
Lewand said.
A native of Wisconsin, Caldwell
also sometimes is regarded as stoic
on game days, a perception he said
he is aware of.
“I’m not a guy that’s going to run
up and down the sideline ranting
and raving during game day because, if you’ve done your work during the course of the week in terms
of preparation, making certain
they’re in the right spot, there’s not
a whole lot of yelling and screaming
that you have to do,” Caldwell said
during his introductory press conference at Ford Field last week.
Caldwell, who peppered his comments with biblical references,
pledged to field a disciplined, smart,
fast football team that shows proper
humility and community involvement off the field.
Media members in Baltimore,
where Caldwell was an assistant
coach with the Baltimore Ravens the
past two seasons, echoed the sentiment that he isn’t a hothead.
“What you see is what you get
with Jim Caldwell: He’s a man of
substance who remains composed
in all settings, on the field, in meetings and during press conferences,”
said Aaron Wilson, the Ravens beat
writer for The Baltimore Sun.
“He believes in setting a high
standard for everyone, and treating people the right way. He’s very
detail-oriented, has a good feel for
the big picture.”
Wilson said Caldwell is better
suited to be a head coach than an
offensive coordinator, and that Lions fans will like his style.
“He’s a Midwest guy who has a
blue-collar work ethic and is very
down to earth. He doesn’t put on
airs. He’s a people person who
treats people with respect,” he said.
Corporate counterpart
Mulally, 68, is a Midwesterner,
too, having grown up in Kansas.
From Previous Page
first customers and currently orders between $800 and $1,000 in
product each week.
“I said a lot of people would be
interested in this stuff,” said Avalon co-owner Ann Perrault. “Now
he has a business that’s at least
three times as big as ours. I joke I
should have taken out stock.”
But Naimi doesn’t just sell
biodegradable products, he also offers small businesses recycling
pickup on the back end.
That service, Recycle Green Co.,
currently has approximately 60
BALLPARKING CALDWELL’S SALARY
The Detroit Lions haven’t disclosed financial details about the contract of
new coach Jim Caldwell but did say it’s for four years.
He was paid $3.5 million annually as head coach of the Indianapolis Colts
from 2009 to 2011, according to a January 2011 report in the Indianapolis
Business Journal.
His salary as offensive coordinator last season for the Baltimore Ravens
wasn’t reported, but upper-tier National Football League coordinators
typically earn more than $1 million.
Jim Schwartz, whom the Lions fired Dec. 30, reportedly is owed $12 million
for the final two years of an extension he signed in 2012, but it’s unknown
whether that means he was making $6 million annually or had triggers in
the deal that determined the payout.
New Orleans Saints coach Sean Payton reportedly is the NFL’s highest-paid
coach at $8 million annually.
— Bill Shea
Bill Ford Jr., executive chairman for Ford Motor Co. and vice
chairman of the Lions, brought the
former Boeing
Co. executive to
run the automaker in September 2006.
“When I hired
Alan Mulally, no
one had ever
heard of him,”
he told reporters
at Wednesday’s
Ford
press
conference, in defense of criticism that the
Caldwell hire was the wrong move.
“A big part of leadership is being
authentic to who you are, thinking
about what you really believe in
and behaving accordingly,” Mulally told New York-based McKinsey &
Co. management consultants in an
interview published in November.
It’s been widely documented that
Mulally saved cash-hemorrhaging
Ford by cleansing the company’s inhibited atmosphere to create more
inclusiveness and buy-in, and
putting a renewed focus on the Ford
brand itself by selling Jaguar, Land
Rover and Aston Martin, and killing
Mercury. He also cut jobs, closed factories and modernized the rest.
Caldwell doesn’t have that much
power. The Lions have a president
and CEO in Lewand and a general
manager in Martin Mayhew —
they conducted the coaching
search — but an NFL coach holds a
CEO’s power in how a team deploys its main asset.
Caldwell’s demeanor impressed
Ford.
“I think he’s very calm and very
measured, but has a real fire burning inside of him,” he said.
management style to produce.
“We’re going to be smart. We’re
going to be a football team that
takes the field that’s not going to
shoot itself in the foot,” he said.
“We’re going to be a team that is
disciplined, that’s focused, that understands situational football. It’s
going to be drilled and drilled and
drilled and not just given lip service, but what you should see on
the field is obviously a product of
our coaching, our instruction and
our demands.”
In addition to reducing penalties
and turnovers — boilerplate language by every football coach —
Caldwell said his Lions will run a
single-back offense, with the quarterback often changing the play at
the line of scrimmage.
They also will run the ball more.
“We want to make certain we
control the line of scrimmage, so I
think you have to have a team offensively that can run the ball,” he
said. “You have to have a team, obviously, on the line of scrimmage,
who can also pass protect.”
That translates into quarterback Matthew Stafford throwing
fewer passes. He led the NFL in
pass attempts in 2011 and 2012 and
ranked fourth in 2013.
A former defensive back at the
University of Iowa, Caldwell has spent
his coaching career working with
quarterbacks and wide receivers.
In Detroit, he’s expected to aid
in the development of Stafford.
“He’s a guy that has talent, he
has ability, he has great leadership
qualities and I think, without question, you’re going see him develop
and then also, certainly, take off in
every facet,” Caldwell said.
The Caldwell hire also produced
naysayers, who blasted the Lions
for what they said was a panic hire.
Critics point to a subpar record
(26-63) as head coach of Wake Forest
University from 1993 to 2000; his Colts
team going 2-14 in 2011, which
prompted his firing; and Baltimore’s offense faltering last season,
when he ran it as the coordinator.
His proponents say Caldwell was
a victim of circumstances in the
NFL. In 2011, he was without allworld quarterback Peyton Manning for the entire season.
The Star’s Kravitz said the
Colts’ management cramped Caldwell.
“The 2-14 debacle really falls on
(Colts president) Bill Polian, who always refused to get himself a decent
backup quarterback,” he said. “The
big question with Jim is how he’ll
operate without Polian looking over
his shoulder. There was always the
sense here in Indy that Polian, who
was very heavy-handed and very involved in everything, held the marionette strings. I’d like to see what
Caldwell does with a bit more freedom.”
The Sun’s Wilson said injuries
hurt Caldwell’s efforts in Baltimore in 2013.
“He was kind of hamstrung with
the offense this year with an offensive line and running game that
struggled and trading (wide receiver) Anquan Boldin and (tight end)
Dennis Pitta getting hurt,” he said.
Other options
In his introductory press conference, Caldwell provided some
hints about what he expects his
Ford faced skeptics when he
brought in Mulally, who began his
career as an aircraft engineer, to
run a car company.
The Lions reportedly were
ready to hire San Diego Chargers offensive coordinator Ken Whisenhunt, but he opted to take the head
coaching job with the Tennessee Titans on Jan. 13.
The Lions also had formal interviews with Gary Kubiak, who was
fired as Houston Texans head coach
before the end of the 2013 season after the team lost 11 consecutive
games; and Mike Munchak, fired
by the Titans on Jan. 4 after three
seasons as head coach.
They also reportedly were interested in former Super Bowl-winning coaches Tony Dungy and Jon
Gruden, but any talks with them
were informal.
Caldwell said the Lions can contend in 2014 — words the Lions’
brass want to hear.
“I believe the time is now. Not
two years or three years from now
down the road somewhere. We’re
right here, right now,” he said.
Bill Shea: (313) 446-1626,
[email protected].
Twitter:
@bill_shea19
customers, including Supino Pizzeria and Russell Street Deli. But Naimi has no interest in getting back
into the trash hauling business, so
he purposely keeps the scale small.
He served Avalon until Perrault’s needs exceeded what Recycle Green could manage.
“At the end of the day, the way
we do it is two men and a truck,”
he said. “It’s not the most efficient
thing. When we reach capacity,
where it’s overwhelming for us,
then we have a partner that we
shift our clients over to. What we
are and always will be is basically
a transition.”
And the market for trash pickup
is about to get bigger because
small businesses will soon have to
find their own trash services.
“The solid waste contracts, once
executed, will only provide for service to our residential customers,”
said Nowling. “The city anticipates continuing to provide service to commercial customers
through the end of the current fiscal year.”
Still Naimi isn’t thinking about
that. He’d rather focus on offering
recycling education and training
to local businesses, teaching employees how to separate and think
ecologically.
“We live in a city where we need
to do a lot of cleanup, so running a
business with about 70 employees
and trying to teach people what it
is to recycle … that’s hard,” Perrault said.
“Matt has created education and
movies that I can just say, ‘OK, you
guys, you’ve got to watch this.’
That’s easier for me, and he’s
changing the culture of dealing
with garbage and waste in an ecological way.”
Amy Haimerl: (313) 446-0416,
[email protected].
Twitter:
@haimerlad
The Xs and Os
The concerns
www.crainsdetroit.com
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20140120-NEWS--0018-NAT-CCI-CD_--
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5:48 PM
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Page 18
2014
UPCOMING
PARTNER EVENTS
Crain’s partners with a variety of
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special subscription offers for their members.
Visit their websites for more details.
Coming Up from the Troy Chamber
Helping Your Brand Stand Out from the Crowd
What makes your business unique and different to customers?
Are you leaving something hidden or ignored? Review realworld examples and find out how to fully realize the power and
potential of your brand.
Jan. 30 • 8 - 9:30 a.m.
MSU Management Education Center
811 W. Square Lake Road, Troy
Troy Chamber members: $19
Non-members: $29 (+$5 day of event)
Breakfast with Michigan Lt. Governor Calley
Join us for an informative meeting covering where Michigan
was, where it is now and where it is headed.
Special thanks to our host Meritor, Inc.
Feb. 28 • 8 - 9:30 a.m.
Meritor, Inc., 2135 W. Maple, Troy
Troy Chamber members: $20
Non-members: $30 (+$5 day of event)
Registration: 248-641-8151, [email protected] or
troychamber.com/cal
Marketing & Sales Executives of Detroit (MSED) Seminar:
The Super Bowl: Mega Opportunity or Marketing Quicksand?
The Super Bowl has cultural, social and business implications
on a worldwide basis and advertising has become a central
feature of the event. We’re not all talking about the game on
Monday morning, we’re talking about the commercials. How do
they impact your company? What can we learn from this year’s
advertising successes and failures? Professor Bernacchi will
present his marketing analysis of the 2014 Super Bowl.
PRESENTED BY: Mike Bernacchi, Ph.D., JD, professor,
marketing, University of Detroit-Mercy
Feb. 4 • 8 - 10:30 a.m.
MSU Management Education Center
811 W. Square Lake Road, Troy
Members: $20 • Non-members: $60
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at 248-643-6590
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Getting Funding to Open, Grow and/or Sustain
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Feb. 5 • 7:30 - 9 a.m.
ITT Tech, 26700 Lasher Rd., Suite 100, Southfield
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Feb. 20 • 4 – 6:30 p.m.
Gastronomy, One Towne Square, Southfield
State of the City
March 17 • 11:30 a.m. – 1 p.m.
Westin Southfield, 1500 Town Center, Southfield
Registration: southfieldchamber.com
Leadership Institute for Women
This session will focus on the foundations of strategic
planning, including the process and its role in achieving
growth. The importance of identifying, building and enhancing
relationships with existing and potential consumers will be
addressed. We will also discuss a strategic marketing plan as
the basis for developing an integrated communications plan
focused on effectively communicating key messages within
B2B or B2C segments.
PRESENTED BY: Mark S. Lee, president and CEO
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March 3 • Kellogg, Battle Creek
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March 11 • Duke Realty, Indianapolis, IN
Registration: miceed.org
Michigan Hispanic
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January 20, 2014
Join the Michigan Hispanic Chamber of Commerce
The Michigan Hispanic Chamber of Commerce (MHCC)
Membership Campaign is in full swing! It’s going to be
an exciting year at MHCC and we want you to join us as a
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membership contact Nilda Thomas, membership director, at
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Solar: Group to review utilities’ stake
■ From Page 1
down significantly” to expand the
program, Dimitry said. “Right
now, solar is still extremely expensive compared with other (forms of
renewable energy). It is eight to 10
times more expensive (after incentives) than utility-owned wind,”
based on customer solar project invoices DTE has seen.
The work group’s report is expected to be completed by July, said
Judy Palnau, a PSC spokesman.
The report will recommend
whether to expand DTE’s SolarCurrents program and Consumers’
comparable Experimental Advanced Renewable Program, or
EARP. Both programs provide financial incentives for residential
and business customers to build
and install photovoltaic systems.
Key questions from the PSC deal
with whether the utilities have enabled enough interested customers
to participate, and with the programs’ pricing structures.
The renewable energy lobby,
meanwhile, seeks to stimulate the
state’s manufacturing and installation industries and considers increased rebate programs a part of
that strategy.
Dianne Byrum, partner at East
Lansing-based political advocacy
firm Byrum & Fisk Advocacy Communications, said the future of energy
in Michigan must focus on more
than just one type of alternative
energy. But if customers are asking for more solar energy, utilities
should adapt to that, she said.
“There’s a lot of interest in solar
energy and the utility is not affording opportunities to have more solar,” she said. “(DTE) is a regulated monopoly and they don’t want
to go beyond coal, but they have to
be responsive to the market.”
Arn Boezaart, director of Grand
Valley State University’s Michigan Alternative and Renewable Energy Center in
Muskegon, said as long as the state’s
renewable energy mandate remains at 10 percent, and other
energy sources
are less expensive, solar adoption will sputter.
“What you’re
seeing is Consumers and DTE
Boezaart
at a point where
they have their 10 percent locked
up and they are not motivated do
anything beyond that,” Boezaart
said.
In its Dec. 19 order approving
DTE’s renewable energy plan, the
PSC said: “While (SolarCurrents)
appears to be working reasonably
well for the customers who are able
to participate, there does seem to be
pent-up demand for the program,
which may indicate that the incentives need to be adjusted.”
How much does solar cost? The
PSC said a residential customer
who installs a 5,000-watt system
would pay about $4.50 per watt, or
$22,500. A customer could receive
an upfront payment from DTE of 20
cents per watt installed, or $1,000,
the PSC said. Federal tax credits of
up to 30 percent are available until
2016. Nonresidential customers follow a different rebate schedule,
based on 13 cents per watt.
DTE’s original solar plan paid
customers $2.40 per installed watt
to help defray capital costs. How-
ever, DTE’s phase-two program
only pays 20 cents per watt.
Dimitry said DTE offered larger
subsidies in the first phase because solar prices were higher
then. The lower financial assistance in phase two still allows capital paybacks in seven years.
“We don’t want subsidies so rich
that there will be a huge pent-up
demand,” Dimitry said.
Dimitry agreed that DTE’s first
SolarCurrents offering in 2009 had
high demand. But she said interest
has softened slightly during the second phase that began in 2012.
Last week, DTE announced it
would accept
applications
through Feb. 13 for the third phase
of SolarCurrents. A fourth phase
will be added later this year, and a
fifth in 2015, if necessary. Projects
can range from 1 to 20 kilowatts.
Policy debate heats up
State law approved in 2008 requires utilities, including DTE and
Consumers, to generate at least 10
percent of power from renewable
energy by 2015.
Michigan Gov. Rick Snyder last
month said he would support legislation increasing the state’s 10 percent mandate. He suggested it
could increase to 20 percent over a
10-year period to 2025. He did not
address solar power other than to
say that increasing Michiganbased renewable energy jobs is an
important byproduct of his plan.
The PSC has the authority to approve renewable energy plans and
consider the impact on private investment and energy diversification in Michigan when it considers
utility plans. It’s asked to consider
the benefits to the state as a whole
— one of the reasons for the community work groups.
Palnau said no utility has filed a
legal or regulatory challenge
PSC’s right to order or encourage
work groups to study various aspects of renewable energy plans.
While both utilities are on track
to meet that 10 percent renewable
energy goal, environmental and
solar groups have asked the PSC to
order the utilities to increase solar power production.
DTE plans to produce nearly 2
percent of its 10 percent renewable
energy production from solar
through its company-owned plants
and residential and business programs. Consumers plans to produce 0.7 percent from its residential and business-only program,
the company said.
“Both utilities are in a similar
position,” said Brad Klein, senior
attorney with the Chicago-based
Environmental Law & Policy Center.
“They have kept solar as a small
experimental program instead of
expanding it to help industry develop in Michigan.
“We think the commission
should require the utilities to do
more with solar, especially since
prices have dropped dramatically
the past two years.”
But David Ronk, Consumers’ director for transactions and wholesale settlements, said while Consumers agreed to participate in the
community work group, it doesn’t
believe a shift to more solar energy
will be workable in the near term.
“Solar continues to be one of the
more expensive technologies
available, even though we have
seen evidence that the cost of solar
has declined,” Ronk said. “We are
reluctant to spend a lot of money at
this point to expand these pilot
programs beyond levels currently
invested in them given other renewable technologies could be
funded at a lower cost than the solar programs.”
Dimitry said it makes no sense
for DTE to expand its solar program while it is still recruiting
customers to participate in a 2megawatt expansion. DTE extended the program in 2012 after the
PSC similarly questioned a proposal to end SolarCurrents.
The company selects projects
from applicants across Southeast
Michigan. In an August 2013
round, incentives were awarded to
56 residential projects and 11
small-business projects.
DTE contends it is unreasonable
for the PSC to burden the company
and its customers with higher energy prices by mandating additional expansion.
More solar jobs?
Doug Jester, a principal with 5
Lakes Energy LLC, a Lansing-based
energy consulting firm, said solar
panel cost reductions are a huge driver to more installations in Michigan. He said solar now costs three
times more than wind in Michigan,
but those solar installation prices
have dropped 65 percent since 2011,
according to GTM Research.
Jester said increasing utility
programs would help the Michigan solar industry grow and keep
up with such other states as Ohio,
Illinois, Indiana and New Jersey.
Jester recommended the PSC order DTE to increase SolarCurrents
to 42 megawatts from DTE’s current 22-megawatt goal.
Jester said several states have
created set-asides for solar power.
For example, New Jersey Gov.
Chris Christie last year promoted
the approval of a 22.5 percent renewable energy standard. The legislation increases the amount of
electricity produced from solar to
2.05 percent from 0.5 percent.
Grand Valley’s Boezaart said increasing the state’s renewable mandate, over the long term, would create market certainty, thereby
creating more jobs.
“If the Legislature raised the
mandate to 30 percent by 2035,
we’d see a reaction by the marketplace,” he said.
Mark Hagerty, president of
Commerce Township-based Michigan Solar Solutions, said the PSC expanding solar rebate programs
could help bring back the solar installation industry locally.
“Most of my competitors have
gone out of business,” Hagerty
said, “because of low financial assistance from DTE and Consumers
and residential customers who
don’t see enough economic benefits to purchase an $18,000 solar
system.
“If the commission ordered
DTE to expand solar by 5
megawatts, my business could increase by 400 to 500 percent and I
could hire more people.”
Jay Greene: (313) 446-0325,
[email protected]. Twitter: @jaybgreene. Dustin Walsh contributed
to this report.
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5:46 PM
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January 20, 2014
RUMBLINGS
Bund fund
ventures into
third version
an Bund, the senior
statesman among
Michigan’s venture
capitalists, is at it again. His
Ann Arbor-based venture
capital company, Plymouth
Management Co., has
launched its third, and what
it plans to be largest, fund.
Plymouth Venture Partners
III is targeting a size of $60
million. Fund II raised $41
million and Fund I $23 million. The third fund will
continue the strategy of investing in growth-stage
businesses in the Great
Lakes region.
Bund, 69, was honored last
May with the lifetime
achievement award
at the sixth
annual
Crain’s Detroit Business M&A
Awards. He
was recruited to MichiBund
gan in 1976
to join one of the two small
venture capital firms then
operating in the state, Midland-based Doan Associates.
Over the years, firms he
has managed have invested
in more than 350 companies.
Bund, a principal and senior adviser at Plymouth
Management, has steadfastly maintained he has no
plans to go out to pasture
despite owning a farm up
north near Harbor Springs.
I
Ficano panel: Missing quote
attribution an oversight
A committee representing Wayne County Execu-
tive Robert Ficano last week
appeared to be touting the
help he provided to Westland for years of cleanup of
a city park that actually reopened last year.
What’s interesting is that
it features a quote from
Westland Mayor William
Wild, who on Wednesday announced his candidacy for
county executive.
The quote from Wild was
pulled from an October 2010
story in the Westland Eagle.
The news release came an
hour after Wild’s candidacy
announcement.
An emailed statement
from the committee said the
Wild quote was “meant to
convey the working partnership between the county and
city on the successful Westland Central City Park project. It was an inadvertent
oversight to not reference
that article as the source of
the quotations.”
The email was signed
“Robert A. Ficano Committee.”
Ficano, who said he did
not know about the news release, has not publicly said
whether he will seek another four-year term.
It’s been 20 years since
Kerrigan attack at Cobo
The Winter Olympics begin
in Sochi, Russia, next
month, and in the run-up
there has been a burst of
nostalgia surrounding the
attack 20 years ago on figure skater Nancy Kerrigan.
If you’ve forgotten, the attempt by a hired goon to
take out Kerrigan’s knee
WEEK ON THE WEB
FROM WWW.CRAINSDETROIT.COM, WEEK OF JAN. 11-17
with a lead pipe — at the behest of rival skater Tonya
Harding’s camp — took place
at Detroit’s Cobo Arena.
The drama was recounted Thursday with a new
ESPN “30 for 30” series documentary, “The Price of
Gold.”
The skaters were in Detroit for the U.S. Figure Skating Championships a month
before the 1994 Winter
Olympics in Lillehammer,
Norway.
Cobo was used for practice skating while the championships were at Joe Louis
Arena. Kerrigan was attacked leaving Cobo after a
practice on Jan. 6, 1994,
prompting international
coverage.
Harding maintains she
didn’t know beforehand
about the attack, planned
by her ex-husband. He and
two others did jail time, and
they insisted Harding knew
ahead of time.
Kerrigan, who continues
to skate in exhibitions, went
on to win a silver medal at
Lillehammer. Harding, who
was banned from competitive skating, has become a
fringe celebrity.
Cobo has since been remodeled from an arena into
part of the Cobo Center exhibition space, and Joe Louis
will be torn down when the
Red Wings leave in a few
years for a new arena elsewhere downtown.
4 firms from Michigan
make best-to-work-for list
There are at least four
great places to work in
Michigan — at least according to Fortune magazine,
which published its annual
“100 Best Companies to
Work For” list online last
week.
They were Detroit-based
Quicken Loans Inc. (No. 5),
Southfield-based Plante
Moran PLLC (No. 23), Kalamazoo-based Stryker Corp.
(No. 42) and Southfieldbased Credit Acceptance
Corp. (No. 52).
BEST FROM THE BLOGS
READ THESE POSTS AND MORE AT WWW.CRAINSDETROIT.COM/BLOGS
Improving office market cues firm Craft Work opens; biz is good
“
There’s a new tenant
and landlord brokerage
firm in town. Kevin
Jappaya, who worked
eight years for Thomas A.
Duke Co., opened
Farmington Hills-based KJ
Commercial Real Estate
Advisors LLC at the start
of the year.
”
Kirk Pinho’s “Big City, Big Deals” blog on real estate is
at www.crainsdetroit.com/section/blogKirkPinho
Page 19
“
After months of
setbacks, an executive
chef change and a ton
of hard work, Craft Work
in West Village is finally
up and running.
”
Nathan Skid’s Detroit-area restaurant blog, “Table
Talk,” can be found at www.crainsdetroit.com/skid
State VC deals
high on numbers,
low on dollars
ichigan had its
best year for the
number of venture capital deals, but with
a comparatively paltry dollar volume. Sixty-eight
deals worth $102.5 million
were completed in 2013,
said the PricewaterhouseCoopers/National Venture
Capital Association
MoneyTree Report based on
data from Thomson Reuters.
In 2012, the state did 49
deals worth $238.9 million.
M
ON THE MOVE
䡲 John Hertel said he is
stepping down as CEO of
the Regional
Transit Authority of
Southeast
Michigan, a
job to
which he
was named
in August
but for
Hertel
which a
signed contract never was
reached. Hertel said he’s
staying on as general manager of the Suburban Mobility
Authority for Regional Transportation bus system. He
worked voluntarily on behalf of the RTA while still
running SMART.
䡲 Larry Freed stepped
down as president and CEO
of Ann Arbor-based ForeSee
Results Inc. less than a
month after the Internet analytics company was acquired by St. Louis-based
Answers Corp. Interim general manager of the ForeSee
business is Don Morrison,
vice president of sales.
䡲 Michigan Humane Society President and CEO Cal
Morgan is leaving, effective
Jan. 24, after 13 years to
lead the Atlanta Humane Society and Georgia Society for
the Prevention of Cruelty to
Animals. The Bingham
Farms-based society’s COO
and senior vice president,
David Williams will be interim president and CEO.
COMPANY NEWS
䡲 Troy-based Flagstar
Bancorp Inc. announced
about 600 layoffs across all
business lines as part of a
restructuring it said will
save $40 million annually.
䡲 Blue Cross Blue Shield of
Michigan reached agreements with 25 hospitals and
more than 4,700 doctors in
Southeast Michigan to provide access to two low-cost
individual health plans it is
developing for sale this year.
䡲 Denso International
America Inc. announced it is
expanding its North American headquarters in Southfield with the purchase of a
140,000-square-foot building
next to its current campus.
The supplier said the $10
million investment was
spurred by rapid growth in
North America.
䡲 A Valassis Communications Inc. investor sued the
board of the Livonia-based
store coupon distributor,
saying it unfairly favored a
$1.84 billion takeover bid
from a company controlled
by billionaire Ronald Perelman, Bloomberg reported.
䡲 A program to match
Dearborn-based Ford Motor
Co. and its tier-one suppliers with Michigan-based
suppliers generated $10.4
million in new contract
wins for state companies.
䡲 Japanese supplier
Koito Manufacturing Co.,
which has a technology
center in Farmington Hills,
agreed to pay $56.6 million
in fines and plead guilty in
federal court to price-fixing
lighting components that
were sold to Toyota Motor
Corp. The case was part of
an ongoing probe by the
U.S. Department of Justice.
䡲 The U.S. Treasury Department announced it
plans to sell 410,000 shares
of Detroit-based Ally Financial for $3 billion as part of
its ongoing effort to recoup
the costs of the $700 billion
financial bailout, the AP reported. The shares will be
offered in a private offering
at $7,375 each.
䡲 Detroit Employment Solutions Corp. announced the
first local class of Platform
to Employment, a program
designed by Bridgeport,
Conn.-based The WorkPlace
to help people move out of
joblessness through five
weeks of training. Detroit is
the eighth city to host the
program.
OTHER NEWS
䡲 U.S. Bankruptcy Judge
Steven Rhodes denied the
city of Detroit permission
to pay UBS AG and Bank of
America Corp. about $165
million to end interest-rate
swaps that have cost taxpayers $202 million since
2009. Rhodes called the payment too high a price.
䡲 In a speech at the North
American International Auto
Show at Cobo Center, Vice
President Joe Biden said the
U.S. auto industry’s resurgence since the 2009 federal
bailout provides a strong
basis for a Detroit recovery. U.S. Commerce Secretary Penny Pritzker also visited the show.
䡲 The Detroit Symphony
Orchestra and its musicians
negotiated a three-year contract that includes 36 weeks
of performances and four
weeks of vacation time. Orchestra compensation will
increase 5.3 percent over
the life of the pact.
䡲 The Detroit Department
of Transportation will equip
250 of its buses with a system of security cameras to
curb violence against drivers and riders, Mayor Mike
Duggan and new DDOT Director Dan Dirks announced.
䡲 Birmingham Mayor
Pro Tem Stuart Sherman
could pay more than
$335,000 to Troy-based Jacob
& Weingarten PC, after jurors in a civil lawsuit trial
found he committed conversion and embezzlement
from the law firm.
䡲 Federal prosecutors
filed fresh money laundering charges against Oakland Township cancer doctor Farid Fata, accused of
intentionally misdiagnosing patients and ordering
unnecessary treatments,
the AP reported. Fata is
scheduled for arraignment
on the new charges Feb. 4.
䡲 A federal judge accepted a new plea deal from
Richard Trabulsy, who helped
the government prosecute
his partner, John Bravata, at
Southfield-based BBC Equities LLC, in a real estate
scheme that ended with
more than $40 million in
losses, the AP reported. Trabulsy likely faces more than
four years in prison after
pleading guilty to fraud.
䡲 Macomb County,
which has outpaced the
larger economic recovery
much of the past three
years, should fall more in
line with the national
growth rate in 2014, Macomb Community College
President Jim Jacobs said in
his annual economic outlook address.
䡲 Median home sale
prices in Wayne, Oakland,
Livingston and Macomb
counties increased 41 percent year over year in December, although sales
went up only 0.2 percent,
said data from Farmington
Hills-based Realcomp II Ltd.
䡲 Former Detroit Red
Wings captain Nicklas Lidstrom will be featured on
limited-edition collectors’
boxes of Detroit Hockey Heroes cereal, while Detroit
Tigers pitcher Justin Verlander’s mug will grace boxes
of granola Fastball Bars.
Both are to be distributed
by PLB Sports of Pittsburgh.
OBITUARIES
䡲 Connie Binsfeld, the former lieutenant governor
who championed children’s
issues and was the first
woman to hold leadership
posts in Michigan’s House,
Senate and executive
branch, died Jan. 12. She
was 89.
䡲 Patricia Boyle, a former
Michigan Supreme Court justice, died Jan 13. She was
76.
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Foundations` aid `right thing to do` for Detroit

Transcription

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